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Inflation, personal taxes, and real output: a dynamic analysis

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  • David Altig
  • Charles T. Carlstrom

Abstract

An examination, using the overlapping-generations approach, of how the interactions between inflation and the nominal taxation of capital income affect the cyclical behavior of the U.S. economy.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Cleveland in its series Working Paper with number 9102.

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Date of creation: 1991
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Handle: RePEc:fip:fedcwp:9102

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Keywords: Inflation (Finance) ; Business cycles ; Income tax;

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References

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  1. Prescott, Edward C., 1986. "Theory ahead of business-cycle measurement," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 25(1), pages 11-44, January.
  2. McGrattan, Ellen R., 1994. "The macroeconomic effects of distortionary taxation," Journal of Monetary Economics, Elsevier, vol. 33(3), pages 573-601, June.
  3. Lawrence J. Christiano & Martin Eichenbaum, 1990. "Current real business cycle theories and aggregate labor market fluctuations," Discussion Paper / Institute for Empirical Macroeconomics 24, Federal Reserve Bank of Minneapolis.
  4. Martin Feldstein, 1981. "Inflation, Capital Taxation, and Monetary Policy," NBER Working Papers 0680, National Bureau of Economic Research, Inc.
  5. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-70, November.
  6. Alan J. Auerbach, 1983. "Corporate Taxation in the United States," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 14(2), pages 451-514.
  7. Bennett T. McCallum, 1988. "Real Business Cycle Models," NBER Working Papers 2480, National Bureau of Economic Research, Inc.
  8. Cooley, T.F. & Hansen, G.D., 1988. "The Inflation Tax In A Real Business Cycle Model," Papers 88-05, Rochester, Business - General.
  9. Cogley, T., 1990. "Spurious Business Cycle Phenomena In Hp Filered Time Series," Working Papers 90-21, University of Washington, Department of Economics.
  10. Chan G. Huh, 1990. "Output, money and price correlations in a real business cycle model," Working Papers in Applied Economic Theory 90-02, Federal Reserve Bank of San Francisco.
  11. Hodrick, Robert J & Prescott, Edward C, 1997. "Postwar U.S. Business Cycles: An Empirical Investigation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(1), pages 1-16, February.
  12. John A. Tatom, 1985. "Federal income tax reform in 1985: indexation," Review, Federal Reserve Bank of St. Louis, issue Feb, pages 5-12.
  13. Nelson, Charles R & Kang, Heejoon, 1979. "Spurious Periodicity in Inappropriately Detrended Time Series," The Warwick Economics Research Paper Series (TWERPS) 161, University of Warwick, Department of Economics.
  14. Gary D. Hansen, 1989. "Technical Progress and Aggregate Fluctuations," UCLA Economics Working Papers 546, UCLA Department of Economics.
  15. Finn E. Kydland & Edward C. Prescott, 1990. "Business cycles: real facts and a monetary myth," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Spr, pages 3-18.
  16. Eichenbaum, Martin, 1991. "Real business-cycle theory : Wisdom or whimsy?," Journal of Economic Dynamics and Control, Elsevier, vol. 15(4), pages 607-626, October.
  17. Laitner, John, 1990. "Tax Changes and Phase Diagrams for an Overlapping Generations Model," Journal of Political Economy, University of Chicago Press, vol. 98(1), pages 193-220, February.
  18. Martin Feldstein & Lawrence Summers, 1983. "Inflation and the Taxation of Capital Income in the Corporate Sector," NBER Chapters, in: Inflation, Tax Rules, and Capital Formation, pages 116-152 National Bureau of Economic Research, Inc.
  19. Finn E. Kydland, 1989. "The role of money in a business cycle model," Discussion Paper / Institute for Empirical Macroeconomics 23, Federal Reserve Bank of Minneapolis.
  20. Miller, Merton H, 1977. "Debt and Taxes," Journal of Finance, American Finance Association, vol. 32(2), pages 261-75, May.
  21. Rios-Rull, Jose-Victor, 1996. "Life-Cycle Economies and Aggregate Fluctuations," Review of Economic Studies, Wiley Blackwell, vol. 63(3), pages 465-89, July.
  22. King, Mervyn A. & Fullerton, Don, 2010. "The Taxation of Income from Capital," National Bureau of Economic Research Books, University of Chicago Press, edition 0, number 9780226436319, January.
  23. Lawrence H. Summers, 1986. "Some skeptical observations on real business cycle theory," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 23-27.
  24. David Altig & Charles T. Carlstrom, 1991. "Bracket creep in the age of indexing: have we solved the problem?," Working Paper 9108, Federal Reserve Bank of Cleveland.
  25. Martin Feldstein, 1982. "Capital Taxation," NBER Working Papers 0877, National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. Andrés Erosa & Gustavo Ventura, 2000. "On Inflation as a Regressive Consumption Tax," UWO Department of Economics Working Papers 20001, University of Western Ontario, Department of Economics.
  2. Elder, Erick, 1999. "Dynamic Fiscal Policy with Regime-Duration Uncertainty: The Tax-Cut Case," Journal of Macroeconomics, Elsevier, vol. 21(1), pages 29-55, January.
  3. Gavin, William T. & Kydland, Finn E. & Pakko, Michael R., 2007. "Monetary policy, taxes, and the business cycle," Journal of Monetary Economics, Elsevier, vol. 54(6), pages 1587-1611, September.
  4. Charles Ka-Yui Leung & Guang-Jia Zhang, 2000. "Inflation and Capital Gains Taxes in a Small Open Economy," Departmental Working Papers _119, Chinese University of Hong Kong, Department of Economics.
  5. Burkhard Heer & Bernd Süssmuth, 2003. "Inflation and Wealth Distribution," CESifo Working Paper Series 835, CESifo Group Munich.
  6. Fehr, Hans, 1999. "Welfare Effects of Dynamic Tax Reforms," Beiträge zur Finanzwissenschaft, Mohr Siebeck, Tübingen, edition 1, volume 5, number urn:isbn:9783161470165, July.
  7. David Altig & Charles T. Carlstrom, 1991. "Bracket creep in the age of indexing: have we solved the problem?," Working Paper 9108, Federal Reserve Bank of Cleveland.
  8. Diaz-Gimenez, Javier & Prescott, Edward C., 1997. "Real returns on government debt: A general equilibrium quantitative exploration," European Economic Review, Elsevier, vol. 41(1), pages 115-137, January.
  9. Charles T. Carlstrom & William T. Gavin, 1991. "A conference on price stability," Economic Review, Federal Reserve Bank of Cleveland, issue Q IV, pages 2-9.
  10. Jang-Ting Guo & Kevin J. Lansing, 1994. "The welfare effects of tax simplification: a general-equilibrium analysis," Working Paper 9409, Federal Reserve Bank of Cleveland.
  11. James Bullard & Steven Russell, 1998. "How costly is sustained low inflation for the U.S. economy?," Working Papers 1997-012, Federal Reserve Bank of St. Louis.
  12. Finn E. Kydland & D'Ann M. Petersen, 1997. "Does being different matter?," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Q III, pages 2-11.
  13. David Altig, 1992. "An ebbing tide lowers all boats: monetary policy, inflation, and social justice," Economic Review, Federal Reserve Bank of Cleveland, issue Q II, pages 14-22.
  14. Charles T. Carlstrom & William T. Gavin, 1991. "Zero inflation: transition costs and shoe-leather benefits," Working Paper 9113, Federal Reserve Bank of Cleveland.

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