Macroeconomic Effects of a Tax on Bond Interest Rates

Oren Sussman

Journal of Money, Credit and Banking, 1991, vol. 23, issue 3, 352-66

Abstract: The effect of taxes on interest earned upon capital accumulation and inflation is discussed within an overlapping generations model. It is shown that an increase in such a tax is likely to reduce both the capital stock and the inflation rate. The model is extended to include the case of a small, open economy, where the effect on the external debt is discussed. Some simulation results demonstrate the magnitude of the effects. The model is used to discuss the macroeconomic effects of financial liberalization. Copyright 1991 by Ohio State University Press.

Date: 1991
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