Winners and Losers From Unexpected Inflation

Abstract

I document the evolution of nominal positions in the US over the last two decades and estimate the redistributive effects of several inflation episodes. I find that the US government gained around 4.5\% of US GDP from the 2021 inflation shock, essentially at the expense of foreigners. In addition, there has been a significant concentration of nominal assets among the wealthiest middle-aged and elderly households, who lost substantially. Most other groups of households gained on average. Raising the inflation target by 2pp would have generated a modest gain for the household sector, especially at the start of the Great Recession.

Keywords: Inflation, redistribution, inequality

JEL Classification: E31, E52