Taxation and the Taylor principle

Rochelle Edge () and Jeremy B. Rudd
Additional contact information
Jeremy B. Rudd: https://www.federalreserve.gov/econres/jeremy-rudd.htm

No 2002-51, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: We add a nominal tax system to a sticky-price monetary business cycle model. When nominal interest income is taxed, the coefficient on inflation in a Taylor-type monetary policy rule must be significantly larger than one in order for the model economy to have a determinate rational expectations equilibrium. When depreciation is treated as a charge against taxable income, an even larger weight on inflation is required in the Taylor rule in order to obtain a determinate and stable equilibrium. These results have obvious implications for assessing the historical conduct of monetary policy.

Keywords: Monetary policy; Inflation (Finance) (search for similar items in EconPapers)
Date: 2002
New Economics Papers: this item is included in nep-acc
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (34)

Downloads: (external link)
http://www.federalreserve.gov/pubs/feds/2002/200251/200251abs.html (text/html)
http://www.federalreserve.gov/pubs/feds/2002/200251/200251pap.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2002-51

Access Statistics for this paper

More papers in Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.) Contact information at EDIRC.
Bibliographic data for series maintained by Ryan Wolfslayer ; Keisha Fournillier ().