BREE years after its enactment, controversy still surrounds the Economic Recovery Tax Act of 1981 (ERTA) and its successor, the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA). On the one hand, the Reagan administration claims that the 1981 tax reductions substantially increased U.S. business investment and contributed to the strong recovery from the 1981—82 recession’. On the other ha...

In this paper, we study Ramsey-optimal fiscal and monetary policy in a mediumscale model of the U.S. business cycle. The model features a rich array of real and nominal rigidities that have been identified in the recent empirical literature as salient in explaining observed aggregate fluctuations. The main result of the paper is that price stability appears to be a central goal of optimal monet...

how inflation taxation affects resource allocation and welfare has received a great deal of attention. so far, this debate has been controversial. in this paper we examine how nominal money growth as a means of public finance affects resource allocation and welfare in a neoclassical endogenous growth model with leisure and money in the utility function and production externality. the present st...

During times of inflation, the use of the last-in, first-out (LIFO) method of inventory valuation has the effect of lowering the reported earnings by excluding inventory holding gains from this number. Current income tax payments due on the reduced earnings are also lower. Taxes payable on inventory holding gains, therefore, are postponed until some future period when the inventory is liquidate...

This paper studies the interaction between monetary and macro-prudential policies in a simple model with both nominal and financial frictions. The nominal friction gives rise to a conventional monetary policy objective emphasized in the New Keynesian literature. The financial friction, in the form of an occasionally binding collateral constraint, gives rise to a financial stability objective. ...

The next round of reform and cuts to federal taxes should focus on bringing down overall personal tax rates, so that the tax mix depends relatively more on consumption taxes rather than income taxes, says a study released today by the C.D. Howe Institute. And Ottawa should pay more attention to payroll tax design, the study suggests, since payroll taxes that are clearly seen to fund desired ben...

Abstract This paper studies the impact of inflation on income taxes in Sweden, UK, and United States during world wars. As tax reforms were rising top marginal rates reducing exemption thresholds, extraordinary levels eroded real value exemptions, brackets, deductions. The micro-simulation actual alternative scenarios shows that made less progressive, particularly Sweden World War I UK II. Neve...

This paper represents a first attempt at a tractable analysis of how monetary policy influences the income distribution in an economy. It presents a monetary growth model in which inflation affects credit market efficiency, and via this link, influences capital accumulation, and the income distribution. In the model, a fraction of the population is capitalists, who have access to a risky but hi...