Ownership of Capital in Monetary Economies and the Inflation Tax on Equity

44 Pages Posted: 14 Feb 2006

See all articles by Ralph Chami

Ralph Chami

International Monetary Fund (IMF)

Thomas F. Cosimano

University of Notre Dame; International Monetary Fund

Connel Fullenkamp

Duke University - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: December 1999

Abstract

Financial instruments are subject to inflation taxes on the wealth they represent and on the nominal income flows they provide. This paper explicitly introduces financial instruments into the standard stochastic growth model with money and production and shows that the value of the firm in this case is equal to the firm's capital stock divided by inflation. The resulting asset-pricing conditions indicate that the effect of inflation on asset returns differs from the effects found in other papers by the addition of a significant wealth tax.

Keywords: inflation tax, channel of monetary policy, asset pricing

JEL Classification: G12, E52

Suggested Citation

Chami, Ralph and Cosimano, Thomas F. and Fullenkamp, Connel, Ownership of Capital in Monetary Economies and the Inflation Tax on Equity (December 1999). IMF Working Paper No. 99/167, Available at SSRN: https://ssrn.com/abstract=880822

Ralph Chami (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-6039 (Phone)
202-623-6068 (Fax)

Thomas F. Cosimano

University of Notre Dame ( email )

513 W. Broad #704
Falls Church, VA 22046
United States
574-807-4876 (Phone)

International Monetary Fund ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Connel Fullenkamp

Duke University - Department of Economics ( email )

213 Social Sciences Building
Box 90097
Durham, NC 27708-0204
United States
(919) 660-1800 (Phone)

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
85
Abstract Views
1,718
Rank
190,265
PlumX Metrics