Accelerated Depreciation and the Efficacy of Temporary Fiscal Policy: Implications for an Inflationary Economy / Andrew B. Abel.

Format:

Book

Author/Creator:

Abel, Andrew B.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w0596.

NBER working paper series no. w0596

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Accelerated Depreciation and the Efficacy of Temporary Fiscal Policy

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1980.

Summary:

The effect on investment of temporary tax rate changes depends on the age profile of depreciation deduct ions. If the depreciation allowance schedule is accelerated, then temporary cuts in the corporate tax rate could reduce investment. Inflation causes the age profile of real depreciation deductions to become accelerated and thus could make temporary tax cuts have a contractionary effect on investment. Two currently proposed reforms are shown to exacerbate this effect. Under these proposals, temporary tax cuts are likely to have opposite effects on investment in short-lived and long-lived capital, thereby complicating the conduct of countercyclical fiscal policy.

Notes:

Print version record

December 1980.