Ownership of Capital in Monetary Economies and the Inflation Tax on Equity
December 1, 1999
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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
Pages:
44
Volume:
1999
DOI:
Issue:
167
Series:
Working Paper No. 1999/167
Stock No:
WPIEA1671999
ISBN:
9781451858167
ISSN:
1018-5941
