Excess Capital Flows and the Burden of Inflation in Open Economies
50 Pages Posted: 27 Aug 2000 Last revised: 6 Oct 2010
Date Written: June 1997
Abstract
This paper estimates the efficiency consequences of interactions between nominal tax systems and inflation in open economies. Domestic inflation changes after-tax real interest rates at home and abroad, thereby stimulating international capital movement and influencing domestic and foreign tax receipts, saving, and investment. The efficiency costs of inflation-induced international capital reallocations are typically much larger than those that accompany inflation in closed economies, even if capital is imperfectly mobile internationally. Differences between inflation rates are responsible for international capital movements and accompanying deadweight losses, suggesting that international monetary coordination has the potential to reduce the inefficiencies associated with inflation-induced capital movements.
Suggested Citation: Suggested Citation
Register to save articles to
your library
Paper statistics
Recommended Papers
-
Fiscal Paradise: Foreign Tax Havens and American Business
By James R. Hines Jr. and Eric M. Rice
-
Altered States: Taxes and the Location of Foreign Direct Investment in America
-
Tax Policy and Foreign Direct Investment in the United States
-
Coming Home to America: Dividend Repatriations by U.S. Multinationals
-
Taxation and Foreign Direct Investment: A Synthesis of Empirical Research
By Ruud A. De Mooij and Sjef Ederveen
-
Income Shifting in U.S. Multinational Corporations
By David Harris, Randall Morck, ...
