Consumer Spending and the After-Tax Real Interest Rate PDF Download
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Author: N. Gregory Mankiw
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
This paper examines the interaction between consumer durable goods andconsumer non-durable goods in determining the responsiveness of totalexpenditure to the after-tax real interest rate. The introduction ofconsumer durables into the consumer's decision problem can have importanteffects on the interest elasticity of total spending. The channelhighlighted here might be called the "user cost effect," in that theafter-tax interest rate enters the implicit user cost of consumer durablegoods. Even if a consumer has a one-period planning horizon, possiblybecause of a binding borrowing constraint, the user cost effect maynonetheless make his spending highly interest sensitive. Finally, thepaper examines the response of the level and composition of consumerspending to the high real interest rates experienced in the early 1980s.
Author: N. Gregory Mankiw
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
This paper examines the interaction between consumer durable goods andconsumer non-durable goods in determining the responsiveness of totalexpenditure to the after-tax real interest rate. The introduction ofconsumer durables into the consumer's decision problem can have importanteffects on the interest elasticity of total spending. The channelhighlighted here might be called the "user cost effect," in that theafter-tax interest rate enters the implicit user cost of consumer durablegoods. Even if a consumer has a one-period planning horizon, possiblybecause of a binding borrowing constraint, the user cost effect maynonetheless make his spending highly interest sensitive. Finally, thepaper examines the response of the level and composition of consumerspending to the high real interest rates experienced in the early 1980s.
Author: Martin S. Feldstein
Publisher:
ISBN:
Category : Inflation (Finance)
Languages : en
Pages : 46
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Book Description
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.
Author: Martin Feldstein
Publisher: University of Chicago Press
ISBN: 0226241785
Category : Business & Economics
Languages : en
Pages : 501
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Book Description
Research on capital formation has long been a major focus of studies sponsored by the National Bureau of Economic Research because of the crucial role of capital accumulation in the process of economic growth. The papers in this volume examine the influence of taxes on capital formation, with specific focus on the determinants of saving and the process of investment in plant and equipment.
Author: Benjamin M. Friedman
Publisher: Vintage
ISBN:
Category : Debts, Public
Languages : en
Pages : 356
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Book Description
This work of real world economics is an incisive look at the consequences of Reaganomics and a blueprint for reversing the damage.
Author: Jonathan Gruber
Publisher:
ISBN:
Category : Interest rates
Languages : en
Pages : 30
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Book Description
One of the most important behavioral parameters in macroeconomics is the elasticity of intertemporal substitution (EIS). Starting with the seminal work of Hall (1978), researchers have used an Euler equation framework to estimate the EIS, relating the growth rate of consumption to the after-tax interest rate facing consumers . This large literature has, however, produced very mixed results, perhaps due to an important limitation: the impact of the interest rate on consumption or savings is identified by time series movements in interest rates. Yet the factors that cause time series movements in interest rates may themselves be correlated with consumption or savings decisions. I address this problem by using variation across individuals in the capital income tax rate. Condidtional on observable characteristics of individuals, tax rate movements cause exogenous shifts in the after-tax interest rate. Using data on total non-durable consumption from the Consumer Expenditure Survey over two decades, I estimate a surprisingly high EIS of 2. This finding is robust to a variety of specification checks.
Author: Martin Feldstein
Publisher: University of Chicago Press
ISBN: 0226241858
Category : Business & Economics
Languages : en
Pages : 134
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Book Description
Economists have long recognized the importance of capital accumulation for productivity and economic growth. The National Bureau of Economic Research is currently engaged in a study of the relationship between such accumulation and taxation policies, with particular focus on saving, risk-taking, and corporate investment in the United States and abroad. The papers presented in Taxes and Capital Formation are accessible, nontechnical summaries of fourteen individual research projects within that study. Complete technical reports on this research are published in a separate volume, The Effects of Taxation on Capital Accumulation, also edited by Martin Feldstein. By addressing some of the most critical policy issues of the day with a minimum of economic jargon, Taxes and Capital Formation makes the results of Bureau research available to a wide audience of policy officials and staff as well as to members of the business community. The volume should also prove useful for courses in public policy, business, and law. In keeping with Bureau tradition, the papers do not contain policy recommendations; instead, they promote a better understanding of how the economy works and the effects of specific policies on particular aspects of the economy.
Author:
Publisher:
ISBN:
Category : Consumption (Economics)
Languages : en
Pages : 84
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Book Description
Author:
Publisher: Atlantic Publishers & Distri
ISBN:
Category :
Languages : en
Pages : 182
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Book Description
Author:
Publisher:
ISBN:
Category : Older people
Languages : en
Pages : 484
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Book Description
Author: Martin Feldstein
Publisher: Chicago : University of Chicago Press
ISBN:
Category : Business & Economics
Languages : en
Pages : 512
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Book Description
Research on capital formation has long been a major focus of studies sponsored by the National Bureau of Economic Research because of the crucial role of capital accumulation in the process of economic growth. The papers in this volume examine the influence of taxes on capital formation, with specific focus on the determinants of saving and the process of investment in plant and equipment.
