Comments and Discussion.

This articles presents comments from economists on a paper by Martin Feldstein and Lawrence Summers regarding the effect of inflation on interest rates under the U.S. tax system. According to William J. Fellner, the paper never gets rid of assumptions that eliminate the real-world properties of the problem. However, he states that the authors are right in stressing that with a nonindexed tax structure and deductible interest costs, we should reject the proposition that the money rate of interest will generally tend to rise by the number of basis points expressing the expected rate of inflation. On the other hand, Robert J. Gordon comments that the paper deals with questions of great concern for the U.S. policy. It attempts to quantify the degree of non-neutrality in the present U.S. tax system. He added that the nonneutrality of the tax system with respect to inflation points to crucial policy implications that go beyond the scope of the paper. Other comments focused on the econometric results in the latter sections of the paper. Christopher Sims insisted that the values near unity of the coefficients on expected inflation in the interest-rate equations of the second section should be considered descriptive rather than structural.