Inflation and Income Inequality in a Variety-Expansion Growth Model With Menu Costs
18 Pages Posted: 16 Jul 2020
Date Written: June 23, 2020
This study explores the effect of inflation on income inequality in a growth model with variety expansion and menu costs. Inflation is found to determine income inequality via both asset-value and interest-rates effects. Our numerical analyses show that higher inflation turns these effects negative, stifling economic growth and mitigating income inequality.
Keywords: Inflation, Income inequality, Menu costs, Variety expansion
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