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Inflation and Taxation with Optimizing Governments

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Author Info
Poterba, James M
Rotemberg, Julio J

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Abstract

This paper examines the empirical validity of the predictions that if governments minimize the deadweight loss from raising revenue through inflation and tax finance, there should be a positive contemporaneous association between inflation and the level of tax burdens. The authors examine the empirical validity of this prediction using data from Great Britain, France, Germany, Japan, and the United States. Inflation and tax rates are as likely to be negatively as positively correlated, so the results cast doubt on the empirical relevance of simple models in which governments with time-invariant tastes choose monetary policy to equate the marginal deadweight burdens of inflation and taxes. Copyright 1990 by Ohio State University Press.

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Publisher Info
Article provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.

Volume (Year): 22 (1990)
Issue (Month): 1 (February)
Pages: 1-18
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Handle: RePEc:mcb:jmoncb:v:22:y:1990:i:1:p:1-18

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  1. Song Han & Casey B. Mulligan, 2008. "Inflation and the size of government," Review, Federal Reserve Bank of St. Louis, issue May, pages 245-267. [Downloadable!]
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  2. Yasser Abdih & Jihad Dagher & Ralph Chami & Peter Montiel, 2008. "Remittances and Institutions: Are Remittances a Curse?," IMF Working Papers 08/29, International Monetary Fund. [Downloadable!]
  3. Hakan Berument & Jac C. Heckelman, 2005. "Fractionalization Effect and Government Financing," The International Journal of Applied Economics, Department of General Business, Southeastern Louisiana University, vol. 2(1), pages 37-49, March. [Downloadable!]
  4. Douglas Holtz-Eakin & Harvey S. Rosen & Schuyler Tilly, 1994. "Intertemporal Analysis of State and Local Government Spending: Theory ad Tests," NBER Working Papers 4261, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  5. Vittorio U. Grilli, 1988. "Seigniorage in Europe," NBER Working Papers 2778, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. Douglas Holtz-Eakin & Harvey S. Rosen, 1991. "Municipal Labor Demand in the Presence of Uncertainty: An Econometric Approach," NBER Working Papers 3516, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Kevin J. Lansing, 1993. "Dynamic optimal fiscal and monetary policy in a business cycle model with income redistribution," Working Paper 9308, Federal Reserve Bank of Cleveland. [Downloadable!]
  8. Lawrence Kenny & Stanley Winer, 2006. "Tax Systems in the World: An Empirical Investigation into the Importance of Tax Bases, Administration Costs, Scale and Political Regime," International Tax and Public Finance, Springer, vol. 13(2), pages 181-215, May. [Downloadable!] (restricted)
  9. Patrick Honohan, 1994. "The Fiscal Approach to Financial Intermediation Policy," Papers WP049, Economic and Social Research Institute (ESRI). [Downloadable!]
  10. Edwards, Sebastian & Tabellini, Guido, 1991. "The political economy of fiscal policy and inflation in developing countries : an empirical analysis," Policy Research Working Paper Series 703, The World Bank. [Downloadable!]
  11. Sebastian Edwards & Guido Tabellini, 1992. "Explaining Fiscal Policies and Inflation in Developing Countries," NBER Working Papers 3493, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  12. Thomas A. Garrett & Gary A. Wagner, 2007. "Red ink in the rearview mirror: local fiscal conditions and the issuance of traffic tickets," Working Papers 2006-048, Federal Reserve Bank of St. Louis. [Downloadable!]
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  13. Hermann Sintim-Aboagye & David Tufte, 2006. "Central Bank Independence, Inflation Variability, and the Revenue Smoothing Hypothesis," International Advances in Economic Research, Springer, vol. 12(2), pages 147-160, May. [Downloadable!] (restricted)
  14. Lawrence W. Kenny & Stanley L. Winer, 2001. "Tax Systems in the World - An Empirical Investigation into the Importance of Tax Bases, Collection Costs, and Political Regime," Carleton Economic Papers 01-03, Carleton University, Department of Economics. [Downloadable!]
  15. T.-W. Ho, 2003. "Regime-switching properties of the optimal seigniorage hypothesis: the case of Taiwan," Applied Economics, Taylor and Francis Journals, vol. 35(4), pages 485-494, January. [Downloadable!] (restricted)
  16. R. Sean Craig, 1991. "EMS interest rate differentials and fiscal policy: a model with an empirical application to Italy," International Finance Discussion Papers 405, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
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