Ownership Of Capital In Monetary Economies And The Inflation Tax On Equity
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Ownership Of Capital In Monetary Economies And The Inflation Tax On Equity
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Author : Ralph Chami
language : en
Publisher:
Release Date : 1999
Ownership Of Capital In Monetary Economies And The Inflation Tax On Equity written by Ralph Chami and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1999 with Financial instruments categories.
Ownership Of Capital In Monetary Economies And The Inflation Tax On Equity
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Author : Mr.Ralph Chami
language : en
Publisher: International Monetary Fund
Release Date : 1999-12-01
Ownership Of Capital In Monetary Economies And The Inflation Tax On Equity written by Mr.Ralph Chami and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 1999-12-01 with Business & Economics categories.
Financial instruments are subject to inflation taxes on the wealth they represent and on the nominal income flows they provide. This paper explicitly introduces financial instruments into the standard stochastic growth model with money and production and shows that the value of the firm in this case is equal to the firm’s capital stock divided by inflation. The resulting asset-pricing conditions indicate that the effect of inflation on asset returns differs from the effects found in other papers by the addition of a significant wealth tax.
Ownership Of Capital In Monetary Economies And The Inflation Tax On Equity
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Author : Ralph Chami
language : en
Publisher:
Release Date : 2008
Ownership Of Capital In Monetary Economies And The Inflation Tax On Equity written by Ralph Chami and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2008 with categories.
Asset pricing models have only partially captured the true inflation risk of equities. The contribution of this paper is to identify and quantify the extra inflation tax on equities that results when ownership of physical capital is separated from nominal ownership of the firm in a production economy with money. We add money to the standard stochastic growth model with production and explicitly distinguish firm ownership of physical capital from household ownership of stock certificates. We prove that the effect of this distinction is to make the value of the firm equal to the firm's capital stock divided by inflation. We then derive the standard asset-pricing conditions from the consumer's Euler equations and show that the effect of inflation on asset returns differs from the effects found in other papers by the addition of a wealth tax. The wealth tax reflects the government's ability to tax the entire future dividend stream at once by taxing the real value of stock certificates, rather than taxing the dividend flow period by period. We show analytically as well as in simulations that the wealth tax effect is significant. This suggests that the presence of the wealth tax is responsible for the greater inflation anxiety in the stock market.
Capital Trading Stock Trading And The Inflation Tax On Equity
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Author : Ralph Chami
language : en
Publisher:
Release Date : 2008
Capital Trading Stock Trading And The Inflation Tax On Equity written by Ralph Chami and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2008 with categories.
A market for used capital goods, or financial instruments that represent the ownership of the used capital goods, induces inflation taxes on wealth and on the nominal income flows they provide. This paper explicitly introduces trading in either used capital goods or financial instruments into the standard stochastic growth model with money and production. These two monetary economies are equivalent. The value of the firm is equal to the firm's capital stock divided by inflation. The resulting asset-pricing conditions indicate that the effect of inflation on asset returns differs from the effects found in the literature by the addition of a significant wealth tax.
The Stock Market Channel Of Monetary Policy
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Author : Mr.Ralph Chami
language : en
Publisher: International Monetary Fund
Release Date : 1999-02-01
The Stock Market Channel Of Monetary Policy written by Mr.Ralph Chami and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 1999-02-01 with Business & Economics categories.
This paper argues that the stock market is an important channel of monetary policy. Monetary policy affects real economic activity because inflation levies a property tax on stocks in addition to an income tax on dividend payments. Inflation thus taxes stocks more heavily than it does bonds. Households alter their required rate of return as inflation changes, and firms adjust production in order to satisfy their shareholders’ demands. As the stock market channel grows in importance, the appropriate intermediate target for the central bank is the price level, with price stability being the ultimate goal.
Inflation Capital Taxation And Monetary Policy
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Author : Martin S. Feldstein
language : en
Publisher:
Release Date : 1981
Inflation Capital Taxation And Monetary Policy written by Martin S. Feldstein and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1981 with Inflation (Finance) categories.
This paper discusses the effects of the interaction between inflation and the taxation of capital income. The principal conclusions are: (1) Inflation substantially increases the total effective tax rate on the income from capital used in the nonfinancial corporate sector. The total effective tax rate has risen from less than 60 percent in the mid-1960's to more than 70 percent in the late 1970's. (2) The higher effective tax rate reduces the real net rate of return to those who provide investment capital. In the late 19701s, the real net rate of return averaged less than three percent. (3) The interact ion between inflation and existing tax rules contributed to the fall in the ratio of share prices to real pretax earnings, or, equivalently, to the rise in the real cost to the firm of equity capital. (4) By reducing the real net return to investors and by widening the gap between the firms' cost of funds and the maximum return that they can afford to pay, the interaction between tax rates and inflation has depressed the rate of net investment in business fixed capital. (5) The failure to consider correctly the effects of the fiscal structure has caused observers to underestimate the expansionary character of monetary policy in the past two decades. (6) The goal of increasing investment while maintaining price stability can be achieved with tight money, a high real interest rate, and tax incentives for investment. A high real net-of-tax interest rate could reduce residential investment and other forms of consumer spending while the tax incentives offset the monetary effect for investment in business capital.
The Costs And Benefits Of Price Stability
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Author : Martin Feldstein
language : en
Publisher: University of Chicago Press
Release Date : 2007-12-01
The Costs And Benefits Of Price Stability written by Martin Feldstein and has been published by University of Chicago Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007-12-01 with Business & Economics categories.
In recent years, the Federal Reserve and central banks worldwide have enjoyed remarkable success in their battle against inflation. The challenge now confronting the Fed and its counterparts is how to proceed in this newly benign economic environment: Should monetary policy seek to maintain a rate of low-level inflation or eliminate inflation altogether in an effort to attain full price stability? In a seminal article published in 1997, Martin Feldstein developed a framework for calculating the gains in economic welfare that might result from a move from a low level of inflation to full price stability. The present volume extends that analysis, focusing on the likely costs and benefits of achieving price stability not only in the United States, but in Germany, Spain, and the United Kingdom as well. The results show that even small changes in already low inflation rates can have a substantial impact on the economic performance of different countries, and that variations in national tax rules can affect the level of gain from disinflation.
Inflation Tax Rules And Capital Formation
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Author : Martin Feldstein
language : en
Publisher: University of Chicago Press
Release Date : 2009-05-15
Inflation Tax Rules And Capital Formation written by Martin Feldstein and has been published by University of Chicago Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2009-05-15 with Business & Economics categories.
Inflation, Tax Rules, and Capital Formation brings together fourteen papers that show the importance of the interaction between tax rules and monetary policy. Based on theoretical and empirical research, these papers emphasize the importance of including explicit specifications of the tax system in such study.
Inflation In Open Economies
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Author : Michael Parkin
language : en
Publisher: Manchester University Press
Release Date : 1978
Inflation In Open Economies written by Michael Parkin and has been published by Manchester University Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 1978 with Currency question categories.
Do Central Banks Need Capital
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Author : Mr.Peter Stella
language : en
Publisher: International Monetary Fund
Release Date : 1997-07-01
Do Central Banks Need Capital written by Mr.Peter Stella and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 1997-07-01 with Business & Economics categories.
Central banks may operate perfectly well without capital as conventionally defined. A large negative net worth, however, is likely to compromise central bank independence and interfere with its ability to attain policy objectives. If society values an independent central bank capable of effectively implementing monetary policy, recapitalization may become essential. Proper accounting practice in determining central bank profit or loss and rules governing the transfer of the central bank’s operating result to the treasury are also important. A variety of country-specific central bank practices are reviewed to support the argument.
