The redistributive effects of inflation and of the introduction of a real tax system in the U.S. bond market

Assa Birati, Alex Cukierman

Research output: Contribution to journalArticlepeer-review

Abstract

This paper investigates which types of borrowers and lenders in the U.S. bond market gain (or lose) as result of the interaction of inflation with a nominal and discriminating tax structure. It is shown that an increase in the rate of inflation favors tax exempt institutions, and probably other lenders too. Corporate borrowers probably gain while mortage borrowers probably lose. The paper also investigates the one shot redistributive effects of indexing the tax structure. It is shown that the reform hurts tax exempt institutional investors and, probably, other lenders too. It hurts corporate borrowers and probably favors state and local governments and mortgage borrowers.

Original languageEnglish
Pages (from-to)125-139
Number of pages15
JournalJournal of Public Economics
Volume12
Issue number1
DOIs
StatePublished - Aug 1979
Externally publishedYes

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