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Monetary Inflation’s Effect on Wealth Inequality: An Austrian Analysis

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The Quarterly Journal of Austrian Economics


Austrian monetary inflation theory claims that changes in the money supply are disproportionately distributed throughout an economy, and as a result wealth is coercively redistributed. This study proposes and tests a model illustrating this connection by examining monetary inflation’s effect on wealth inequality. After testing the model’s validity, this study compares monetary inflation’s effect on several measures of wealth inequality, concluding that not only is monetary inflation a significant variable, but its effect on wealth inequality is more pronounced at the extremities of the distribution.

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  1. The monetary base is the value of all currency and coin in circulation. M1 is a measure of the money supply that adds checkable and demand deposits to the monetary base. M2 is a measure of the money supply that adds time deposits and short term investments to M1.


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Correspondence to Zoran Balac.

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Balac, Z. Monetary Inflation’s Effect on Wealth Inequality: An Austrian Analysis. Quart J Austrian Econ 11, 1–17 (2008).

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