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Some benefits of reducing inflation in transition economies

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  • Blaszkiewicz, Monika

    ()
    (BOFIT)

  • Konieczny, Jerzy

    ()
    (BOFIT)

  • Myslinska, Anna

    ()
    (BOFIT)

  • Radziwiland, Artur

    ()
    (BOFIT)

  • Wozniak, Przemyslaw

    ()
    (BOFIT)

Abstract

We analyse welfare effects of the interactions between the tax system and inflation in Poland and in Ukraine, using the framework developed by Feldstein (1997, 1999). This approach stresses the fact that inflation increases distortions created by the tax system, in particular distortions to intertemporal saving decisions. We find that the effects are much smaller in the two transition countries than in developed marketeconomies. The reason is that taxation of investment returns is much more limited. Our results suggest that taxes on investment returns should be avoided in any future redesign of the tax system.

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Bibliographic Info

Paper provided by Bank of Finland, Institute for Economies in Transition in its series BOFIT Discussion Papers with number 16/2002.

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Length: 26 pages
Date of creation: 18 Dec 2002
Date of revision:
Handle: RePEc:hhs:bofitp:2002_016

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Postal: Bank of Finland, BOFIT, P.O. Box 160, FI-00101 Helsinki, Finland
Phone: + 358 10 831 2268
Fax: + 358 10 831 2294
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Web page: http://www.suomenpankki.fi/bofit_en/
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  1. Cukierman, Alex & Miller, Geoffrey P. & Neyapti, Bilin, 2002. "Central bank reform, liberalization and inflation in transition economies--an international perspective," Journal of Monetary Economics, Elsevier, vol. 49(2), pages 237-264, March.
  2. Juan J. Dolado & José M. González-Páramo & José Viñals, 1997. "A Cost-Benefit Analysis of Going from Low Inflation to Price Stability in Spain," Banco de Espa�a Working Papers 9728, Banco de Espa�a.
  3. Karl-Heinz Todter & Gerhard Ziebarth, 1999. "Price Stability versus Low Inflation in Germany: An Analysis of Costs and Benefits," NBER Chapters, in: The Costs and Benefits of Price Stability, pages 47-94 National Bureau of Economic Research, Inc.
  4. Martin Feldstein, 1997. "Capital Income Taxes and the Benefit of Price Stability," NBER Working Papers 6200, National Bureau of Economic Research, Inc.
  5. Leo Bonato, 1998. "Price stability: some costs and benefits in New Zealand," Reserve Bank of New Zealand Discussion Paper Series G98/10, Reserve Bank of New Zealand.
  6. Martin Feldstein, 1999. "The Costs and Benefits of Price Stability," NBER Books, National Bureau of Economic Research, Inc, number feld99-1, octubre-d.
  7. Martin Feldstein, 1996. "The Costs and Benefits of Going from Low Inflation to Price Stability," NBER Working Papers 5469, National Bureau of Economic Research, Inc.
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