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Interest income taxation, optimal monetary policy, and macroeconomic volatility

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Abstract

This paper studies optimal discretionary monetary policy in an extension of the basic new Keynesian model that incorporates interest income taxation, focusing on the effect of changes in the interest income tax rate on macroeconomic volatility. Simulations show that high levels of taxation increase inflation volatility, the output gap volatility, and the unconditional expectation of the central bank's loss function.

Keyword : Monetary policy, interest income taxation, discretion política monetária, tributação da receita de juros, discrição

How to Cite
Araujo, E. (2011). Interest income taxation, optimal monetary policy, and macroeconomic volatility. Brazilian Business Review, 8(1), 50–59. https://doi.org/10.15728/bbr.2011.8.1.3

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