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Inflation, Tax Rules, and the Long Term Interest Rates

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Author Info
Martin Feldstein
Lawrence H. Summers

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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.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 0232.

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Date of creation: Apr 1979
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Publication status: published as Feldstein, Martin and Summers, Lawrence. "Inflation, Tax Rules, and the Long-Term Interest Rate." Brookings Papers on Economic Activity, Vol. 1, (1978), pp. 61-109.
Handle: RePEc:nbr:nberwo:0232

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  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. [Downloadable!] (restricted)
  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. [Downloadable!]
  3. Martin Feldstein, 1981. "Adjusting Depreciation in an Inflationary Economy: Indexing versus Acceleration," NBER Working Papers 0395, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. Helen Louri, 1989. "Regional Policy and Investment Behaviour: The Case of Greece, 1971--1982," Regional Studies, Taylor and Francis Journals, vol. 23(3), pages 231-239, June. [Downloadable!] (restricted)
  5. Martin Feldstein & Lawrence H. Summers, 1980. "Inflation and the Taxation of Capital Income in the Corporate Sector," NBER Working Papers 0312, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. Lawrence H. Summers, 1981. "Inflation and the Valuation of Corporate Equities," NBER Working Papers 0824, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. James M. Poterba, 1985. "Inflation, Income Taxes, and Owner-Occupied Housing," NBER Working Papers 0553, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. Martin Feldstein, 1986. "Budget Deficits, Tax Rules, and real Interest Rates," NBER Working Papers 1970, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  9. 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. [Downloadable!] (restricted)
    Other versions:
  10. 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, Göteborg University, Department of Economics, revised 27 Mar 2003. [Downloadable!]
  11. Karen K. Lewis & Martin D. Evans, 1992. "Do Expected Shifts in Inflation Policy Affect Real Rates?," NBER Working Papers 4134, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  12. Casey B. Mulligan, 2002. "Capital Tax Incidence: First Impressions from the Time Series," NBER Working Papers 9374, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  13. Don Fullerton & Yolanda K. Henderson, 1988. "Long-Run Effects of the Accelerated Cost Recovery System," NBER Working Papers 0828, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  14. 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. [Downloadable!] (restricted)
    Other versions:
  15. 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. [Downloadable!] (restricted)
  16. Patric H. Hendershott, 1985. "Tax Reform and Financial Markets," NBER Working Papers 1707, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  17. 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. [Downloadable!] (restricted)
  18. Thomas Downs & Patric H. Hendershott, 1987. "Tax Policy and Stock Prices," NBER Working Papers 2094, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  19. 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. [Downloadable!]
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