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Inflation, Tax Rules, and the Long Term-Interest Rate

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Author Info

  • Martin Feldstein

    (National Bureau of Economic Research and Harvard University)

  • Lawrence Summers

    (National Bureau of Economic Research and Harvard University)

Abstract

Although the return to capital is a focus of research in both macroeconomics and public finance, each specialty has approached this subject with an almost total disregard for the other's contribution. Macroeconomic studies of the effect of inflation on the rate of interest have implicitly ignored the existence of taxes and the problems of tax depreciation. Similarly, empirical studies of the incidence of corporate tax changes have not recognized that the effect of the tax depends on the rate of inflation and have ignored the information on the rate of return that investors receive in financial markets. Our primary purpose in this paper is to begin to build a bridge between these two approaches to a common empirical problem.

(This abstract was borrowed from another version of this item.)

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Bibliographic Info

Article provided by Economic Studies Program, The Brookings Institution in its journal Brookings Papers on Economic Activity.

Volume (Year): 9 (1978)
Issue (Month): 1 ()
Pages: 61-110

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Handle: RePEc:bin:bpeajo:v:9:y:1978:i:1978-1:p:61-110

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Keywords: macroeconomics; inflation; tax rules; Long Term-Interest Rate;

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Citations

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Cited by:
  1. David F. Bradford & Don Fullerton, 1982. "Pitfalls in the Construction and Use of Effective Tax Rates," NBER Working Papers 0688, National Bureau of Economic Research, Inc.
  2. A. Steven Holland, 1984. "Real interest rates: what accounts for their recent rise?," Review, Federal Reserve Bank of St. Louis, issue Dec, pages 18-29.
  3. Martin D. Evans & Karen K. Lewis, 1992. "Do Expected Shifts in Inflation Policy Affect Real Rates?," Working Papers 92-22, New York University, Leonard N. Stern School of Business, Department of Economics.
  4. Martin Feldstein, 1981. "Adjusting Depreciation in an Inflationary Economy: Indexing versus Acceleration," NBER Working Papers 0395, National Bureau of Economic Research, Inc.
  5. Lawrence H. Summers, 1990. "Estimating the Long-Run Relationship Between Interest Rates and Inflation: A Response to McCallum," NBER Working Papers 1448, National Bureau of Economic Research, Inc.
  6. Miyagawa, Shigeyoshi & Morita, Yoji, 2002. "The Fisher Effect and The Long–Run Phillips Curve --in the case of Japan, Sweden and Italy --," Working Papers in Economics 77, University of Gothenburg, Department of Economics, revised 27 Mar 2003.
  7. Casey B. Mulligan, 2002. "Capital Tax Incidence: First Impressions from the Time Series," NBER Working Papers 9374, National Bureau of Economic Research, Inc.
  8. Fullerton, Don & Henderson, Yolanda Kodrzycki, 1985. "Long-run Effects of the Accelerated Cost Recovery System," The Review of Economics and Statistics, MIT Press, vol. 67(3), pages 363-72, August.
  9. Harvey S. Rosen & Kenneth T. Rosen & Douglas Holtz-Eakin, 1984. "Housing Tenure, Uncertainty, and Taxation," NBER Working Papers 1168, National Bureau of Economic Research, Inc.
  10. Mervyn A. King & Don Fullerton, 1983. "The Taxation of Income from Capital: A Comparative Study of the U.S., U.K., Sweden and West Germany--Comparisons of Effective Tax Rates--," NBER Working Papers 1073, National Bureau of Economic Research, Inc.
  11. Patric H. Hendershott, 1985. "Tax reform and financial markets," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, pages 153-186.
  12. Martin Feldstein & Lawrence H. Summers, 1979. "Inflation and the Taxation of Capital Income in the Corporate Sector," NBER Working Papers 0312, National Bureau of Economic Research, Inc.
  13. Patric H. Hendershott & Sheng Cheng Hu, 1983. "The Allocation of Capital Between Residential and Nonresidential Uses: Taxes, Inflation and Capital Market Constraints," NBER Working Papers 0718, National Bureau of Economic Research, Inc.
  14. Lawrence H. Summers, 1981. "Inflation and the Valuation of Corporate Equities," NBER Working Papers 0824, National Bureau of Economic Research, Inc.
  15. Thomas Downs & Patric H. Hendershott, 1987. "Tax Policy and Stock Prices," NBER Working Papers 2094, National Bureau of Economic Research, Inc.
  16. Dailami, Mansoor & Hinh T. Dinh, 1991. "Interest rate policy in Egypt : its role in stabilization and adjustment," Policy Research Working Paper Series 655, The World Bank.
  17. James M. Poterba, 1985. "Inflation, Income Taxes, and Owner-Occupied Housing," NBER Working Papers 0553, National Bureau of Economic Research, Inc.
  18. Martin Feldstein, 1986. "Budget Deficits, Tax Rules, and real Interest Rates," NBER Working Papers 1970, National Bureau of Economic Research, Inc.

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