Capital Trading, Stock Trading, and the Inflation Tax on Equity
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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.
Published Version (Please cite this version)10.1006/redy.2001.0129
Publication InfoChami, Ralph; Cosimano, Thomas F; & Fullenkamp, Connel (2001). Capital Trading, Stock Trading, and the Inflation Tax on Equity. Review of Economic Dynamics, 4(3). pp. 575-606. 10.1006/redy.2001.0129. Retrieved from http://hdl.handle.net/10161/2050.
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Professor of the Practice of Economics
Professor Fullenkamp specializes in the investigation of financial market development and regulation of financial markets. His projects often involve the exploration of such variables as immigrant worker remittances, economic policy, and the development of countries. His completed papers have appeared in various leading academic journals, including The Cato Journal, the Journal of Banking and Finance, the Review of Economic Dynamics, and the Review of Economics and Statistics. Titles of his p