Excess Capital Flows and the Burden of Inflation in Open Economies / Mihir A. Desai, James R. Hines Jr..

Format:

Book

Author/Creator:

Desai, Mihir A.

Contributor:

National Bureau of Economic Research.

Hines, James R, Jr.

Series:

Working Paper Series (National Bureau of Economic Research) no. w6064.

NBER working paper series no. w6064

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1997.

Summary:

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.

Notes:

Print version record

June 1997.