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Macroeconomic Effects of a Tax on Bond Interest Rates

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  • Sussman, Oren

Abstract

The effect of taxes on interest earned upon capital accumulation and inflation is discussed within an overlapping generations model. It is shown that an increase in such a tax is likely to reduce both the capital stock and the inflation rate. The model is extended to include the case of a small, open economy, where the effect on the external debt is discussed. Some simulation results demonstrate the magnitude of the effects. The model is used to discuss the macroeconomic effects of financial liberalization. Copyright 1991 by Ohio State University Press.

Suggested Citation

  • Sussman, Oren, 1991. "Macroeconomic Effects of a Tax on Bond Interest Rates," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 23(3), pages 352-366, August.
  • Handle: RePEc:mcb:jmoncb:v:23:y:1991:i:3:p:352-66
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    Cited by:

    1. Donald A. R. George & Les Oxley, 2013. "Rational Expectations Dynamics: A Methodological Critique," ESE Discussion Papers 217, Edinburgh School of Economics, University of Edinburgh.
    2. Alberto Alesina & Vittorio Grilli & Gian Maria Milesi-Ferrett, 1993. "The Political Economy of Capital Controls," NBER Working Papers 4353, National Bureau of Economic Research, Inc.
    3. Eran Yashiv, 1997. "Capital Controls as Taxation Policy," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 4(3), pages 263-276, July.
    4. Renu Kohli & Kenneth Kletzer, 2001. "Financial Repression and Exchange Rate Management in Developing Countries; Theory and Empirical Evidence for India," IMF Working Papers 01/103, International Monetary Fund.
    5. Gupta, Kanhaya L. & Lensink, Robert, 1997. "Financial repression and fiscal policy," Journal of Policy Modeling, Elsevier, vol. 19(4), pages 351-373, August.

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