The Welfare Cost of Inflation Risk Under Imperfect Insurance

Abstract : What are the costs of inflation fluctuations and who bears those costs? In this paper, we investigate this question by means of a quantitative incomplete-market, heterogenous-agent model wherein households hold real and nominal assets and are subject to both idiosyncratic labor income shocks and aggregate inflation risk. A key feature of our analysis is a nonhomothetic specification for households' preferences towards money and consumption goods. Unlike traditional specifications, ours allows the model to reproduce the broad features of the distribution of monetary assets (in addition to being consistent with the distribution of nonmonetary assets). Inflation risk is found to generate significant welfare losses for most households, i.e., between 1 and 1.5 percent of permanent consumption. The loss is small or even negative for households at the very top of the productivity and/or wealth distribution.
Type de document :
Pré-publication, Document de travail
Liste complète des métadonnées

Littérature citée [38 références]  Voir  Masquer  Télécharger
Contributeur : Spire Sciences Po Institutional Repository <>
Soumis le : lundi 29 juin 2015 - 23:32:06
Dernière modification le : mardi 23 mai 2017 - 11:21:31
Archivage à long terme le : mercredi 16 septembre 2015 - 06:29:04


Fichiers produits par l'(les) auteur(s)




Olivier Allais, Yann Algan, Edouard Challe, Xavier Ragot. The Welfare Cost of Inflation Risk Under Imperfect Insurance. 2015. ⟨hal-01169656⟩



Consultations de la notice


Téléchargements de fichiers