{
  "title": "Inflation and Income Distribution: Further Evidenceon Empirical Links",
  "publication": "IMF Working Papers, August 1, 1995",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/30/inflation-and-income-distribution-further-evidenceon-empirical-links-1298",
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  "summary": "This paper examines the effects of inflation and associated financial instability on income distribution. Using both pooled cross country and single country time series models, the level of inflation, inflation variability, and the variability of the nominal exchange rate are shown to impact negativ",
  "sections": [
    {
      "heading": "Summary",
      "content": "- This paper examines the effects of inflation and associated financial instability on income distribution.\n- Using both pooled cross country and single country time series models, the paper shows that:\n  - the level of inflation,\n  - inflation variability, and\n  - the variability of the nominal exchange rate\n  are shown to impact negatively on overall income equality.\n- Looking at disaggregate measures of income distribution, the question of whether inflation is a progressive or regressive tax is found to be negatively correlated with:\n  - the level of development, and\n  - the sophistication of the financial structure.\n- The paper argues that these results point towards financial variables as a partial way of rectifying the generally poor explanatory power of both cross-country and time series models of income distribution."
    },
    {
      "heading": "Key empirical findings",
      "content": "- Level of inflation is negatively associated with overall income equality.\n- Inflation variability is negatively associated with overall income equality.\n- Variability of the nominal exchange rate is negatively associated with overall income equality.\n- The relationship between inflation and its incidence on different income groups (progressive vs. regressive) is negatively correlated with:\n  - level of development, and\n  - sophistication of the financial structure."
    },
    {
      "heading": "Methodology (as described)",
      "content": "- Empirical approach uses:\n  - pooled cross country models, and\n  - single country time series models.\n- Disaggregate measures of income distribution are analyzed to assess the progressive vs. regressive incidence of inflation."
    },
    {
      "heading": "Analytical implication",
      "content": "- Financial variables (e.g., measures of financial structure and sophistication) can help improve the explanatory power of models linking inflation and income distribution.\n- The interaction between inflation dynamics and financial structure is central to understanding distributional outcomes."
    },
    {
      "heading": "Policy-relevant interpretation",
      "content": "- Strengthening financial structure and sophistication is implied as a partial avenue to mitigate the negative distributional effects of inflation and inflation instability.\n- Addressing inflation variability and nominal exchange rate volatility can be important for preserving income equality.\n\nSource: Inflation and Income Distribution: Further Evidenceon Empirical Links, Anne Marie Gulde, IMF Working Papers 1995, 086 (August 1, 1995).\n\n---\n\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/30/inflation-and-income-distribution-further-evidenceon-empirical-links-1298"
    }
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    "Authors: Anne Marie Gulde",
    "Published: August 1, 1995",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781451850826.001",
    "This paper examines the effects of inflation and associated financial instability on income distribution.",
    "Using both pooled cross country and single country time series models, the paper shows that:",
    "Looking at disaggregate measures of income distribution, the question of whether inflation is a progressive or regressive tax is found to be negatively correlated with:",
    "The paper argues that these results point towards financial variables as a partial way of rectifying the generally poor explanatory power of both cross-country and time series models of income distribution.",
    "Level of inflation is negatively associated with overall income equality.",
    "Inflation variability is negatively associated with overall income equality.",
    "Variability of the nominal exchange rate is negatively associated with overall income equality.",
    "The relationship between inflation and its incidence on different income groups (progressive vs. regressive) is negatively correlated with:",
    "Empirical approach uses:",
    "Disaggregate measures of income distribution are analyzed to assess the progressive vs. regressive incidence of inflation.",
    "Financial variables (e.g., measures of financial structure and sophistication) can help improve the explanatory power of models linking inflation and income distribution.",
    "The interaction between inflation dynamics and financial structure is central to understanding distributional outcomes.",
    "Strengthening financial structure and sophistication is implied as a partial avenue to mitigate the negative distributional effects of inflation and inflation instability.",
    "Addressing inflation variability and nominal exchange rate volatility can be important for preserving income equality."
  ],
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