Inflation and income inequality in a variety-expansion growth model with menu costs

This study explores the effect of inflation on income inequality in a growth model with variety expansion and menu costs. Inflation is found to determine income inequality via both asset-value and interest-rates effects. Our numerical analyses show that higher inflation turns these effects negative, stifling economic growth and mitigating income inequality. (c) 2020 Elsevier B.V. All rights reserved.