Some Benefits of Reducing Inflation in Transition Economies

Monika Blaszkiewicz, Jerzy Konieczny, Anna Myslinska and Przemyslaw Wozniak

No 251, CASE Network Studies and Analyses from CASE-Center for Social and Economic Research

Abstract: We apply Feldstein's (1997, 1999) analysis of the interactions between the tax system and inflation to two transition economies: Poland and Ukraine. We find that the taxrelated costs of inflation in these countries are significantly smaller than in mature market economies. Our analysis points out that the tax system in these two countries is superior to the tax system in developed market economies, as taxes on investment income are lower. It implies that transition countries should avoid replicating other tax systems and, instead, take advantage of the unique opportunity to design and entrench the features of their tax system which are superior to those in mature economies.

Keywords: price level; inflation; deflation; efficiency; optimal taxation; finance; national income; product; expenditure (search for similar items in EconPapers)
Pages: 36 Pages
Date: 2003
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