Are Inflationary Shocks Regressive? A Feasible Set Approach / Felipe N. Del Canto, John R. Grigsby, Eric Qian, Conor Walsh.

Format:

Book

Author/Creator:

Del Canto, Felipe N.

Contributor:

Grigsby, John R.

Qian, Eric.

Walsh, Conor (Conor Andrew)

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w31124.

NBER working paper series no. w31124

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2023.

Summary:

We develop a framework to measure the welfare impact of inflationary shocks throughout the distribution. The first-order impact of a shock is summarized by the induced movements in agents' feasible sets: their budget constraint and borrowing constraints. To measure this impact, we combine estimated impulse response functions with micro-data on household consumption bundles, asset holdings and labor income for different US households. We find that inflationary oil shocks are regressive, but monetary expansions are progressive, and there is substantial heterogeneity throughout the life cycle. In both cases, the dominant channel is the effect of the shock on asset prices, not movements in goods prices or labor income.

Notes:

April 2023.

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