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Taxation, Debt and Relative Prices in the Long Run: The Irish Experience

Author

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  • Vahagn Galstyan

    (Department of Economics, Trinity College Dublin)

  • Adnan Velic

    (Dublin Institute of Technology)

Abstract

This paper investigates the effects of public debt and distortionary labour taxation on the long-run behaviour of Irish relative non-traded goods prices. We highlight that higher public debt, acting through higher taxes, has an equivocal impact on the relative supply of non-traded goods and, correspondingly, relative prices. Our empirical analysis for Ireland suggests that taxes and public debt play significant roles in the long run, comoving negatively with the relative price of non-tradables. Accordingly, shifts in public debt and taxation bear implications for the country's international price competitiveness.

Suggested Citation

  • Vahagn Galstyan & Adnan Velic, 2016. "Taxation, Debt and Relative Prices in the Long Run: The Irish Experience," Trinity Economics Papers tep1016, Trinity College Dublin, Department of Economics.
    • Handle: RePEc:tcd:tcduee:tep1016
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    References listed on IDEAS

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    1. Galstyan, Vahagn & Velic, Adnan, 2017. "Debt thresholds and real exchange rates: An emerging markets perspective," Journal of International Money and Finance, Elsevier, vol. 70(C), pages 452-470.

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    More about this item

    Keywords

    labour taxation; distortionary; government spending; public debt; real exchange rate; relative non-traded prices;
    All these keywords.

    JEL classification:

    • F00 - International Economics - - General - - - General
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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