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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. 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.
  2. Chan G. Huh, 1990. "Output, money and price correlations in a real business cycle model," Working Papers in Applied Economic Theory, Federal Reserve Bank of San Francisco 90-02, Federal Reserve Bank of San Francisco.
  3. Eichenbaum, Martin, 1991. "Real business-cycle theory : Wisdom or whimsy?," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 15(4), pages 607-626, October.
  4. John A. Tatom, 1985. "Federal income tax reform in 1985: indexation," Review, Federal Reserve Bank of St. Louis, Federal Reserve Bank of St. Louis, issue Feb, pages 5-12.
  5. Cogley, T., 1990. "Spurious Business Cycle Phenomena In Hp Filered Time Series," Working Papers, University of Washington, Department of Economics 90-21, University of Washington, Department of Economics.
  6. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, Econometric Society, vol. 50(6), pages 1345-70, November.
  7. 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.
  8. Lawrence H. Summers, 1986. "Some skeptical observations on real business cycle theory," Quarterly Review, Federal Reserve Bank of Minneapolis, Federal Reserve Bank of Minneapolis, issue Fall, pages 23-27.
  9. Gary D. Hansen, 1989. "Technical Progress and Aggregate Fluctuations," UCLA Economics Working Papers, UCLA Department of Economics 546, UCLA Department of Economics.
  10. Cooley, T.F. & Hansen, G.D., 1988. "The Inflation Tax In A Real Business Cycle Model," RCER Working Papers 155, University of Rochester - Center for Economic Research (RCER).
  11. Edward C. Prescott, 1986. "Theory ahead of business cycle measurement," Staff Report, Federal Reserve Bank of Minneapolis 102, Federal Reserve Bank of Minneapolis.
  12. Ellen R. McGrattan, 1991. "The macroeconomic effects of distortionary taxation," Discussion Paper / Institute for Empirical Macroeconomics, Federal Reserve Bank of Minneapolis 37, Federal Reserve Bank of Minneapolis.
  13. Lawrence J. Christiano & Martin Eichenbaum, 1990. "Current real business cycle theories and aggregate labor market fluctuations," Working Paper Series, Macroeconomic Issues, Federal Reserve Bank of Chicago 90, Federal Reserve Bank of Chicago.
  14. Laitner, John, 1990. "Tax Changes and Phase Diagrams for an Overlapping Generations Model," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 98(1), pages 193-220, February.
  15. David Altig & Charles T. Carlstrom, 1991. "Bracket creep in the age of indexing: have we solved the problem?," Working Paper, Federal Reserve Bank of Cleveland 9108, Federal Reserve Bank of Cleveland.
  16. Nelson, Charles R & Kang, Heejoon, 1979. "Spurious Periodicity in Inappropriately Detrended Time Series," The Warwick Economics Research Paper Series (TWERPS), University of Warwick, Department of Economics 161, University of Warwick, Department of Economics.
  17. Martin Feldstein, 1981. "Inflation, Capital Taxation, and Monetary Policy," NBER Working Papers 0680, National Bureau of Economic Research, Inc.
  18. 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, 01-2013.
  19. Robert J. Hodrick & Edward Prescott, 1981. "Post-War U.S. Business Cycles: An Empirical Investigation," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 451, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  20. Bennett T. McCallum, 1988. "Real Business Cycle Models," NBER Working Papers 2480, National Bureau of Economic Research, Inc.
  21. Martin Feldstein, 1982. "Capital Taxation," NBER Working Papers 0877, National Bureau of Economic Research, Inc.
  22. Finn E. Kydland & Edward C. Prescott, 1990. "Business cycles: real facts and a monetary myth," Quarterly Review, Federal Reserve Bank of Minneapolis, Federal Reserve Bank of Minneapolis, issue Spr, pages 3-18.
  23. Miller, Merton H, 1977. "Debt and Taxes," Journal of Finance, American Finance Association, American Finance Association, vol. 32(2), pages 261-75, May.
  24. Finn E. Kydland, 1989. "The role of money in a business cycle model," Discussion Paper / Institute for Empirical Macroeconomics, Federal Reserve Bank of Minneapolis 23, Federal Reserve Bank of Minneapolis.
  25. Rios-Rull, Jose-Victor, 1996. "Life-Cycle Economies and Aggregate Fluctuations," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 63(3), pages 465-89, July.
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Citations

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Cited by:
  1. CHARLES T. Carlstrom & WILLIAM T. Gavin, 1993. "Zero Inflation: Transition Costs And Shoe Leather Benefits," Contemporary Economic Policy, Western Economic Association International, Western Economic Association International, vol. 11(1), pages 9-17, 01.
  2. Diaz-Gimenez, Javier & Prescott, Edward C., 1997. "Real returns on government debt: A general equilibrium quantitative exploration," European Economic Review, Elsevier, Elsevier, vol. 41(1), pages 115-137, January.
  3. Heer, Burkhard & Sussmuth, Bernd, 2007. "Effects of inflation on wealth distribution: Do stock market participation fees and capital income taxation matter?," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 31(1), pages 277-303, January.
  4. Michael R. Pakko & William T. Gavin & Finn E. Kydland, 2005. "Monetary Policy, Taxes, and the Business Cycle," 2005 Meeting Papers, Society for Economic Dynamics 265, Society for Economic Dynamics.
  5. James Bullard & Steven Russell, 1998. "How costly is sustained low inflation for the U.S. economy?," Working Papers, Federal Reserve Bank of St. Louis 1997-012, Federal Reserve Bank of St. Louis.
  6. Leung, Charles Ka Yui & Zhang, Guang-Jia, 2000. "Inflation and capital gains taxes in a small open economy," International Review of Economics & Finance, Elsevier, Elsevier, vol. 9(3), pages 195-208, July.
  7. Jang-Ting Guo & Kevin J. Lansing, 1994. "The welfare effects of tax simplification: a general-equilibrium analysis," Working Paper, Federal Reserve Bank of Cleveland 9409, Federal Reserve Bank of Cleveland.
  8. Finn E. Kydland & D'Ann M. Petersen, 1997. "Does being different matter?," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, Federal Reserve Bank of Dallas, issue Q III, pages 2-11.
  9. Fehr, Hans, 1999. "Welfare Effects of Dynamic Tax Reforms," Beiträge zur Finanzwissenschaft, Mohr Siebeck, Tübingen, Mohr Siebeck, Tübingen, edition 1, volume 5, number urn:isbn:9783161470165, July.
  10. Erosa, Andres & Ventura, Gustavo, 2002. "On inflation as a regressive consumption tax," Journal of Monetary Economics, Elsevier, Elsevier, vol. 49(4), pages 761-795, May.
  11. Charles T. Carlstrom & William T. Gavin, 1991. "A conference on price stability," Economic Review, Federal Reserve Bank of Cleveland, Federal Reserve Bank of Cleveland, issue Q IV, pages 2-9.
  12. David Altig & Charles T. Carlstrom, 1991. "Bracket creep in the age of indexing: have we solved the problem?," Working Paper, Federal Reserve Bank of Cleveland 9108, Federal Reserve Bank of Cleveland.
  13. Elder, Erick, 1999. "Dynamic Fiscal Policy with Regime-Duration Uncertainty: The Tax-Cut Case," Journal of Macroeconomics, Elsevier, Elsevier, vol. 21(1), pages 29-55, January.
  14. David Altig, 1992. "An ebbing tide lowers all boats: monetary policy, inflation, and social justice," Economic Review, Federal Reserve Bank of Cleveland, Federal Reserve Bank of Cleveland, issue Q II, pages 14-22.

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