Capital Trading, Stock Trading, and the Inflation Tax on Equity

Journal Article (Journal Article)

A market for used capital goods, or financial instruments that represent the ownership of the used capital goods, induces inflation taxes on wealth and on the nominal income flows that they provide. This paper explicitly introduces trading in either used capital goods or financial instruments into the standard stochastic growth model with money and production. These two monetary economies are equivalent. The value of the firm 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 the literature by the addition of a significant wealth tax. Journal of Economic Literature Classification Numbers: E0, E4, E5. © 2001 Academic Press.

Full Text

Duke Authors

Cited Authors

  • Chami, R; Cosimano, TF; Fullenkamp, C

Published Date

  • July 1, 2001

Published In

Volume / Issue

  • 4 / 3

Start / End Page

  • 575 - 606

International Standard Serial Number (ISSN)

  • 1094-2025

Digital Object Identifier (DOI)

  • 10.1006/redy.2001.0129

Citation Source

  • Scopus