Inflation, Tax Rules, and the Long Term Interest Rates

47 Pages Posted: 28 May 2004 Last revised: 22 Aug 2010

See all articles by Martin S. Feldstein

Martin S. Feldstein

National Bureau of Economic Research (NBER); Harvard University

Lawrence H. Summers

Harvard University; National Bureau of Economic Research (NBER); Harvard University - Harvard Kennedy School (HKS)

Date Written: 1979

Abstract

Although the return to capital is a focus of research in both macroeconomics and public finance, each specialty has approached this subject with an almost total disregard for the other's contribution. Macroeconomic studies of the effect of inflation on the rate of interest have implicitly ignored the existence of taxes and the problems of tax depreciation. Similarly, empirical studies of the incidence of corporate tax changes have not recognized that the effect of the tax depends on the rate of inflation and have ignored the information on the rate of return that investors receive in financial markets. Our primary purpose in this paper is to begin to build a bridge between these two approaches to a common empirical problem.

Suggested Citation

Feldstein, Martin S. and Summers, Lawrence H., Inflation, Tax Rules, and the Long Term Interest Rates (1979). NBER Working Paper No. w0232. Available at SSRN: https://ssrn.com/abstract=226646

Martin S. Feldstein (Contact Author)

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Lawrence H. Summers

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National Bureau of Economic Research (NBER)

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Harvard University - Harvard Kennedy School (HKS) ( email )

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