Yaz Terajima

Inflation, nominal portfolios, and wealth redistribution in Canada

This paper quantifies the redistributional effects of inflation in Canada that arise through the revaluation of nominal assets and liabilities. We find that the effects are non‐trivial even for low inflation episodes. The main winners are young, middle‐class households with mortgage debt. The government receives a windfall gain from its long‐term debt. The old, the rich or the middle‐aged, middle‐class lose, largely owing to their holdings of bonds and non‐indexed defined benefit pension assets. Finally, our Canada‐U.S. comparison reveals that the extent of redistributions can be quite different even between countries of similar economic and legal environments. (Ce texte quantifie les effets de redistribution de la richesse de l’inflation au Canada attribuable a la reevaluation des actifs et des dettes nominaux. On decouvre que ces effets ne sont pas insignifiants meme pour des episodes de faible inflation. Le gouvernement encaisse un gain inattendu de sa dette a long terme. Les plus vieux, les riches ou la classe moyenne d’âge moyen essuient des pertes a cause des obligations qu’ils detiennent et des actifs non‐indexes dans leurs regimes de rentes a prestations definies. Finalement, les comparaisons Canada‐Etats‐Unis montrent que l’importance de la redistribution peut etre fort differente meme entre deux pays ou les environnements economiques et legaux se ressemblent.)