Investigating the Nonlinear Effects of Inflation Tax on Income Distribution Inequality: NARDL Approach

Document Type : Research Paper

Authors

1 Department of Economics, Faculty of Economics and Management, University of Tabriz, Tabriz, Iran.

2 Department of Economics, Faculty of Economics and Social Sciences, Shahid Chamran University of Ahvaz, Ahvaz, Iran.

10.22103/jdc.2024.22089.1418

Abstract

Objective: The distributional consequences of inflation have played a major role in growth and inequality theories and have always been the subject of debate and study. In recent years, with the prominence of the distributional consequences of monetary policies, understanding the relationship between inflation and income inequality has become a very important priority in policymaking. A very important variable in recent years, especially in developing countries that suffer from high inflation rates, is the inflation tax, which leads to a decrease in the purchasing power of individuals and businesses in favor of the government. The inflation tax is a part of the wealth of businesses and households that has been transferred to the government as a result of inflation.
Method: Considering this issue, this study examines the nonlinear effects of the inflation tax on income inequality in Iran using the nonlinear ARDL (NARDL) approach over the period 1981 to 2021.
Results: The results of the study showed that the inflation tax had positive and significant effects on income inequality in Iran. Also, based on other study results, these effects were nonlinear.
Conclusion: The effect of inflation tax on income inequality follows a nonlinear pattern.

Keywords

Main Subjects

References

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  • Receive Date: 25 August 2023
  • Revise Date: 27 January 2024
  • Accept Date: 10 February 2024

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