Document Type
Article
Language
eng
Format of Original
6 p.
Publication Date
12-2006
Publisher
Elsevier
Source Publication
Journal of Macroeconomics
Source ISSN
0164-0704
Original Item ID
doi: 10.1016/j.jmacro.2008.10.003
Abstract
This paper considers a model of an open economy in which the degree of income-tax progressivity influences the interaction among openness, central bank independence, and the inflation rate. Our model suggests that an increase in the progressivity of the tax system induces a smaller response in real output to a change in the price level. This implies that increased income-tax progressivity reduces the equilibrium inflation rate and that the effect of increased income-tax progressivity on inflation is smaller when the central bank places a higher weight on inflation or when there is greater openness. Examination of cross-country inflation data provides empirical support for these key predictions.
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Recommended Citation
Daniels, Joseph P. and VanHoose, David D., "Openness, Income-Tax Progressivity, and Inflation" (2006). Economics Faculty Research and Publications. 11.
https://epublications.marquette.edu/econ_fac/11
Comments
Accepted version. Journal of Macroeconomics, Vol. 31, No. 3 (September 2009): 485-491. DOI. Published under Creative Commons license Attribution-NonCommercial-NoDerivatives 4.0 International.