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.

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.

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

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Economics Commons

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