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

By Thomas F. Cosimano, Ralph Chami, Connel Fullenkamp

December 1, 1999

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Format: Chicago

Thomas F. Cosimano, Ralph Chami, and Connel Fullenkamp. Ownership of Capital in Monetary Economies and the Inflation Tax on Equity, (USA: International Monetary Fund, 1999) accessed September 18, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

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.

Subject: Asset prices, Financial instruments, Inflation, Stock markets, Stocks

Keywords: Capital stock, WP

Publication Details

Pages:

44
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1999/167
Stock No:

WPIEA1671999
ISBN:

9781451858167
ISSN:

1018-5941

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