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Openness, Income-Tax Progressivity, and Inflation
- Publication Year :
- 2007
-
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.
- Subjects :
- Inflation
Macroeconomics
Economics and Econometrics
media_common.quotation_subject
jel:F43
Monetary economics
jel:F40
jel:F41
Empirical research
Central bank
Income tax
Openness to experience
Economics
Open economy
Price level
Openness, Tax Progressivity, Inflation
Indexation
health care economics and organizations
media_common
Subjects
Details
- Database :
- OpenAIRE
- Accession number :
- edsair.doi.dedup.....eaef1acf9ee3f6306455d2be6dbf6389