How Does Inflation Affect Different Age Groups?

33 Pages Posted: 20 Dec 2023

See all articles by Volker Hahn

Volker Hahn

University of Konstanz

Annika Schürle

University of Konstanz

Date Written: December 12, 2023

Abstract

This paper proposes an overlapping-generations model with sticky wages and prices to examine which inflation rate is socially optimal. While flexible wages would result in positive optimal levels of inflation, we show that sticky wages, in combination with empirically plausible changes in productivity over workers’ lives, make moderate deflation optimal. We also study intergenerational conflicts and show that young voters support a transition to lower inflation while older ones tend to support higher inflation rates.

Keywords: trend inflation, inflation target, sticky wages, sticky prices, overlapping-generations models

JEL Classification: E21, E31, E52, J31, D72

Suggested Citation

Hahn, Volker and Schürle, Annika, How Does Inflation Affect Different Age Groups? (December 12, 2023). Available at SSRN: https://ssrn.com/abstract=4662413. or http://dx.doi.org/10.2139/ssrn.4662413

Volker Hahn (Contact Author)

University of Konstanz ( email )

Box 143
Konstanz, 78457
Germany

Annika Schürle

University of Konstanz ( email )

Fach D-144
Universitätsstraße 10
Konstanz, D-78457
Germany

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