Treasury Debt and Inflation Tax

Abstract

We calculate the implicit inflation tax borne by households due to their holdings of U.S. Treasury debt. Nominal assets lose value due to unexpected inflation. We calculate unexpected changes in current and future inflation and document households’ holdings of Treasury debt across the wealth distribution, accounting for direct and indirect holdings through financial intermediaries. Combining these two pieces of information, we calculate the implied inflation tax across household wealth groups over the past four decades.

Jesse LaBelle

Fourth-Year Economics PhD Candidate

Jesse LaBelle is a fourth-year PhD Candidate in the Northwestern University Economics Department.