Inflation and the Incidence of Income Taxes on Interest Income: Some Results for the United States, 1972-74

Inflation affects individuals and income classes in many ways—as consumers, taxpayers, wage earners, savers, asset holders, lenders, borrowers, and so forth. Because of this multiplicity of influences, it is difficult, and perhaps impossible, to assess the total economic impact of inflation. For this reason, empirical studies have limited themselves to analyzing the impact of inflation on individuals or income classes in their roles as consumers, savers, or wage earners. This partial approach does not answer the question of whether the total impact of inflation is or is not beneficial to individuals in particular income classes, but it does provide interesting information that can be useful for policy purposes. This paper will follow this partial approach and analyze the impact of inflation on individuals in connection with the tax treatment of interest paid or received in the United States.


Inflation affects individuals and income classes in many ways—as consumers, taxpayers, wage earners, savers, asset holders, lenders, borrowers, and so forth. Because of this multiplicity of influences, it is difficult, and perhaps impossible, to assess the total economic impact of inflation. For this reason, empirical studies have limited themselves to analyzing the impact of inflation on individuals or income classes in their roles as consumers, savers, or wage earners. This partial approach does not answer the question of whether the total impact of inflation is or is not beneficial to individuals in particular income classes, but it does provide interesting information that can be useful for policy purposes. This paper will follow this partial approach and analyze the impact of inflation on individuals in connection with the tax treatment of interest paid or received in the United States.

Inflation affects individuals and income classes in many ways—as consumers, taxpayers, wage earners, savers, asset holders, lenders, borrowers, and so forth. Because of this multiplicity of influences, it is difficult, and perhaps impossible, to assess the total economic impact of inflation. For this reason, empirical studies have limited themselves to analyzing the impact of inflation on individuals or income classes in their roles as consumers, savers, or wage earners. This partial approach does not answer the question of whether the total impact of inflation is or is not beneficial to individuals in particular income classes, but it does provide interesting information that can be useful for policy purposes. This paper will follow this partial approach and analyze the impact of inflation on individuals in connection with the tax treatment of interest paid or received in the United States.

I. Some Theoretical Background

When a country enters an inflationary period, the nominal rate of interest charged on loans must be increased if the lender’s real interest income and the borrower’s real cost of funds are to remain unchanged. More specifically, in a world without income taxes, an increase in the market interest rate equal to the rate of inflation would be sufficient to keep the real rate of return on loans (and their real cost to borrowers) to the preinflation level. However, income taxes complicate these simple conclusions. When interest income is subject to income taxes, and interest payments are deductible expenses, the increase in the nominal rate has to be somewhat greater. In recent contributions, several writers 1 have independently reached the conclusion that during an inflationary period the nominal or market rate of interest would have to be r* where


In this equation r* can be called the required interest rate; r is the interest rate that would prevail in the absence of inflation;2 α is the rate of inflation over the relevant period (that we shall assume to be one year); and t is the rate at which the interest income of the individual is taxed. If this required rate of interest were established, the lender who received it would be as well off or as badly off, qua lender, as in the noninflationary situation, provided, of course, that he did not suffer from money illusion.3 Equally, the borrower who paid the required rate r* would also be no better or no worse off.

If income taxes with proportional rates were levied, the t in equation (1) would be fixed, so that the required rate r* would be the same for every taxpayer regardless of his income. Consequently, if such a rate came to be established, the real positions of lenders and borrowers would not change except in relation to loans contracted in the preinflationary era and that covered several years.4 However, in most countries income taxes are levied with progressive, rather than proportional, rates. This means that taxpayers at different income levels are taxed at different rates. It follows that equation (1) has to be rewritten as


where the i refers to a particular individual or income class. As ti depends on the income level, the required interest rate is no longer the same for all individuals. Consequently, no market rate could ever adjust to leave all lenders and/or borrowers in the same situation that existed before inflation.

If the market rate of interest should adjust fully for the rate of inflation and for, say, an average tax rate,5 it would be too high for some taxpayers and too low for others, depending on the income tax rate to which they were subject. More specifically, the higher the income of individuals (the higher their marginal tax rate), the higher needs to be the rate of interest that they have to receive as lenders—or that they have to pay as borrowers—in order for them to remain in the pre-inflationary real situation.6 However, ignoring risk and other factors which may influence individual loans, the interest rates that become established in the market are uniform for all taxpayers, so that some taxpayers are bound to gain, or lose, more than others.

In this paper, an attempt is made to obtain some general empirical estimates for individual taxpayers of gains and/or losses by income classes associated with the recent inflation (and the taxation of interest income) in the United States. The analysis will be conducted in relation to the income classes for individual taxpayers shown in various issues of Statistics of Income: Individual Income Tax Returns (hereinafter referred to as Statistics of Income), a publication of the U. S. Internal Revenue Service. Thus, enterprises will be ignored.7 The data to be analyzed pertain to 1972, 1973, and 1974—the latest three years for which the necessary data are available. These were years when the rate of inflation increased sharply (it more than tripled); they are, therefore, particularly suitable for the kind of analysis pursued in the paper. The United States is used as an important and convenient example; however, the theory and the procedure are as applicable to other countries as they are to the United States.

II. Determination of Required Rates for the United States, 1972-74

The consumer price index rose by 3.3 per cent in 1972, by 6.2 per cent in 1973, and by 11.0 per cent in 1974. If interest income had not been taxed, these percentage changes—which correspond to the α in the two equations above—would have given the rate of interest that would have left the lenders with zero real interest income. In other words, if the rate of interest had been exactly equal to the rate of inflation, the interest received by a lender would have been just sufficient to compensate him for the inflation-induced losses in the real value of the financial assets that he had loaned. And, similarly, the interest that a borrower would have had to pay would have just balanced (for him) the decline in the real value of his liability. However, interest income was taxed, and the tax rates varied, ceteris paribus, with the taxpayer’s level of income. Also, interest payments were deducted as costs from gross income in the determination of taxable income. Thus, the value of these deductions (in terms of the reduction they brought in tax liability) was closely and directly related to the income of the taxpayer. All of the above assertions concerning interest income and its taxation are, of course, still valid today.

Table 1 shows the effective average tax rates for 1972, 1973, and 1974—that is, the ratios of tax liabilities to adjusted gross incomes (AGIs)8—for the 24 income classes reported in the Statistics of Income. These average tax rates ranged from very low figures for low incomes to about 50 per cent for very high incomes. When these rates are combined with the α1ti rate of inflation for each year in the expression (where i = 1, . . ., 24 refers to particular income classes), one gets the rates of interest that each class should have received if it were to end up with zero real interest income. Anything above these rates, which are shown in Table 2, would have left lenders with positive real interest income and anything below would have left them with negative real interest income. Mutatis mutandis, borrowers who, given their income level, paid the rates indicated in Table 2 would have been paying a zero real interest rate on the borrowed capital. If they had paid more, they would have incurred positive real costs of borrowing, while they would have received net subsidies if they had paid less.

Table 1.

Ratios of Tax Payments to Adjusted Gross Incomes, 1972-741

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Sources: U. S. Internal Revenue Service, Statistics of Income-1972: Individual Income Tax Returns (Washington, 1974); Preliminary Report, Statistics of Income: Individual Income Tax Returns, 1973 (Washington, 1975), and 1974 (Washington, 1976).

These ratios are called effective average tax rates (ti = Ti/AGIi).

Table 2.

Interest Rates Required to Provide Lenders with Zero Real Interest Incomes, 1972-74 1

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Sources: Table 1 and (for the rates of inflation) U. S. Council of Economic Advisers, Economic Report of the President (Washington, 1976).

The percentages in the table are obtained from the expression α/1 – ti. The rate of inflation a was 3.3 per cent in 1972, 6.2 per cent in 1973, and 11.0 per cent in 1974.

The ti rates used in these calculations are the effective average tax rates—that is, the ratios of tax payments to AGIs for each income class. An alternative would be to use the ratios of tax payments to taxable incomes;9 still another would be to use the statutory marginal tax rates at which the incomes of given classes are taxed. These two alternatives would have substantially increased the values of ti thus leading to much higher α1ti ratios. These two alternatives could be defended on the assumption that interest income is a marginal income, so that it is taxed at the marginal rate to which an individual is subject; this is true because most exemptions and deductions apply to other income sources (wages, salaries, etc.). There is some validity to this argument, especially in inflationary situations when nominal interest income is likely to increase by a far greater percentage than wage and salary income;10 thus, the higher marginal income is likely to be taxed at higher-than-average rates. After deliberating over these alternatives, I decided to select the more conservative one. Therefore, I have used the effective average tax rates. Table 6 in the Appendix shows the ratios of tax payments to taxable income.

III. Tax Incidence in the United States

In 1972, the α1ti ratio calculated as described above ranged from 3.4 per cent for taxpayers with AGIs less than $1,000 to 6.1 per cent for those α1ti with AGIs above $1 million. In 1973, the ratio ranged from 6.3 per cent to 11.7 per cent; in 1974, it ranged from 11.5 per cent to 21.7 per cent. It follows that, in order to have received a zero real income from a loan, a taxpayer in the lowest income class should have received a rate of interest of 3.4 per cent in 1972, 6.3 per cent in 1973, and 11.5 per cent in 1974. A taxpayer that belonged to the highest income class should have received rates of 6.1 per cent in 1972, 11.7 per cent in 1973, and 21.7 per cent in 1974. These, of course, are the rates that would have left the borrowers with zero net interest costs.11

How do these estimated rates relate to actual rates? This is not an easy question to answer, as there is not just one rate but rather a whole spectrum of rates available. Table 3 shows bond yields and interest rates on selected financial assets for 1972-74. In 1972, the rates shown ranged from 4 per cent to over 7 per cent; in 1973, they ranged from 5 per cent to 8 per cent; and in 1974, they ranged from 6 per cent to about 10 per cent. Relating these rates to those required for a zero real interest income (i.e., those in Table 2), it can be seen that, while in 1972 most taxpayers would have received positive interest incomes on new loans, in 1973 this became difficult for taxpayers with high AGIs, especially for those with incomes about $50,000; in 1974, it became very difficult (and perhaps impossible) for practically everyone. In 1974, the rate of interest should have ranged from more than 11 per cent for low-income groups to more than 21 per cent for very high-income groups (and for corporations), in order to leave them with a positive interest income. Since, by 1974, interest rates were, generally, far below these levels, the income tax had obviously become a capital tax for all lenders, and particularly for those with high incomes.12

Table 3.

Interest Rates and Bond Yields, 1972-74

(In per cent per annum)

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Source: U.S. Council of Economic Advisers, Economic Report of the President (Washington, 1976) p. 239.

Rate on new issues within period.

Selected note and bond issues.

These are tax exempt.

The conclusions reached in the previous paragraph relate to lenders, and should be reversed when borrowers are considered. Consequently, while in 1972 most of the borrowers paying the going rates of interest had positive real costs of borrowing (as the interest rates that they paid exceeded the required rates shown in Table 2), by 1974 most borrowers were receiving (as borrowers) net capital subsidies.13

Taxpayers may be lenders, borrowers, or both. Within each income class, borrowers or lenders may predominate. Therefore, whether an income class gains or loses from the tax treatment of the lending and borrowing activities of its members in an inflationary situation depends on the net balance between borrowing and lending. As lenders, individuals receive interest payments from individual borrowers; banks and other financial intermediaries; corporations; and federal, state, and local governments; as well as from foreign sources. As borrowers, individuals pay interest to individual lenders, banks and other financial intermediaries, corporations, and, to a much lesser extent, to governments and foreign lenders. To the extent that these flows (i.e., interest paid or received by individuals) are reported and are taxable, they are reflected in data from the Internal Revenue Service, which appear in Table 7 in the Appendix and are used to calculate Table 4. Before considering the latter table, a few comments should be made about the Internal Revenue Service interest statistics.

Table 4.

Net Differences Between Interest Received and Paid by Size of Adjusted Gross Income, 1972-74

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Source: Table 7 in the Appendix.

In Table 4, interest received refers to the taxable portion of interest received on bonds, debentures, notes, mortgages, personal loans, bank deposits, and savings accounts.14 It is important to notice that these figures exclude the interest on tax-exempt state and local government obligations, as this income does not have to be reported on tax returns.15 The figures also exclude interest received by individuals who do not file tax returns. Interest paid, on the other hand, includes interest paid on personal debts, mortgages, bank loans, and installment purchases of real or personal property. It does not, however, include interest paid or money borrowed to buy tax-exempt securities, single premium life insurance, and endowment contracts. Furthermore, interest relating to business, royalty, and rental income is deducted directly from this income so that it is not reflected in the data. Prior to 1972, interest paid exceeded interest received. In 1972, 1973, and 1974, on the other hand, interest received exceeded interest paid by increasingly large amounts.16

Table 4 shows, for each class and for each of the three years under consideration, the net difference between the total interest income received by that class and the total interest deductions claimed by that class. This net difference indicates whether the class as a whole was a net lender or a net borrower. In 1972, all the classes with AGIs of less than $8,000 or more than $30,000 were net lenders, while those with AGIs greater than $8,000 but smaller than $30,000 were net borrowers. In 1973, the net borrowers were those with AGIs of more than $9,000 but less than $30,000; all others were net lenders. In 1974, the net borrowers were those with AGIs of more than $10,000 but less than $30,000; all others were net lenders. From these estimates, one can derive the following conclusion: In 1974, when the rate of inflation climbed very high, the classes that benefited most from the tax treatment of interest incomes were those with AGIs above $10,000 but below $30,000. For these classes, interest deductions related to home ownership must have been particularly significant. As a consequence of the tax treatment of interest incomes and interest deductions, these groups received substantial capital subsidies that may have amounted to 4 or 5 per cent of their net debt. The interest payments that they made were far less than what would have been required to leave them with a zero real cost of borrowing. As far as their lending and borrowing activities were concerned, they clearly gained from inflation. On the other hand, the other classes—the lower-income and higher-income classes—were subject to substantial capital taxes. For the very high-income classes, these capital taxes may have exceeded 10 per cent of the principal; these taxes were very significant for the low-income classes as well. For this group, the interest incomes received were far below what would have been required to compensate individuals for the inflation-induced erosion of their loans.17

IV. Net Balance vis-à-vis the Government

The preceding section has dealt with gains and losses among income classes related to the tax treatment of interest income during an inflationary situation. This section considers some gains or losses accruing to the U.S. Government, as a consequence of the tax treatment of interest income and deductions. The Government gains from the taxing of interest incomes but loses from the deductions accorded to interest payments.18 The question that I wish to raise here is whether, on balance, the Government was a gainer or a loser over the 1972-74 period.

The method followed is a simple one. The net positions of the income classes vis-à-vis interest incomes (the figures in Table 4) have been multiplied by the average tax rates (shown in Table 1). If the net position of a class was that of a creditor (i.e., if interest received exceeded interest paid), then the multiplication of the net income by the effective average tax rate gave a net positive tax payment. However, if the net position was that of a debtor (interest paid exceeded interest received), the multiplication of the average tax rate by the net deduction gave an estimate of the taxes lost by the Government. The results are shown in Table 5.

Table 5.

Net Balance vis-à-vis the U.S. Government, 1972-74

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Sources: Tables 1 and 4 in the text and Table 7 in the Appendix.

In 1972, the value of the interest deductions in terms of tax reductions amounted to $816.2 million, while the value of the tax payments was $634.8 million. As a consequence, the net loss in tax revenue to the Government associated with the tax treatment of interest income was $181.4 million. In 1973, the tax reduction associated with net deductions was $977.2 million while the value of tax payments was $776.1 million, so that the net loss to the Government in terms of foregone tax revenue was $201.1 million. In 1974, however, there was a drastic change in the net balance. In fact, while the value of the deductions rose to $1,091.3 million, that of tax payments also rose to $1,299.0 million; the Government became a net gainer by $207.7 million. Between 1973 and 1974, there was a net change of about $400 million in the position of the taxpayers vis-à-vis the Government. Consequently, the Government was definitely a gainer from inflation in this context.19 Table 5 shows the changes in the relative positions of the various income classes vis-à-vis the Government.

V. Concluding Remarks

Inflation benefits or harms individuals in many ways, some of which are obvious, while others are much less so. It is not easy to determine whether, on balance, an individual or an income class gains or loses. This paper has attempted to deal with just one way in which inflation affects income classes. I have tried to show to what extent income classes have gained or lost because of the tax treatment of interest incomes and payments during the inflation of 1972-74. The main beneficiaries were the middle-income classes, which were more likely to have substantial deductions related to their home mortgages. It was also shown that, insofar as tax treatment of interest income was concerned, the Government was also a net gainer from inflation. Thus, the tax treatment of interest income per se resulted in a redistribution of income in favor of the middle-income classes and the Government. It needs to be emphasized that the results obtained relate to income classes rather than to individuals. Within each class, there were people who gained or lost more than others.

The redistributional effects emphasized in this paper would be removed, or at least reduced in intensity, if the part of interest income the was taxed and the part of interest payments that was deducted as a cost were equal to the real rate of return. This alternative appears to be an attractive theoretical recommendation and it has been supported by some authors.20 However, the practical and administrative implications of such a policy have not yet received the attention that they deserve. Until these practical implications are sorted out, the theoretical recommendation should be kept in abeyance.


Table 6.

Ratios of Tax Payments to Taxable Income, 1972-74

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Sources: U. S. Internal Revenue Service, Statistics of lncome-1972: Individual Income Tax Returns (Washington, 1974); U. S. Internal Revenue Service Preliminary Report, Statistics of Income-1973: Individual Income Tax Returns (Washington, 1975); U.S. Internal Revenue Service Preliminary Report, Statistics of Income—1974: Individual Income Tax Returns (Washington, 1976).
Table 7.

Interest Received and Paid by Size of Adjusted Gross Income, 1972-74

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Sources: U. S. Internal Revenue Service, Statistics of Income-1972: Individual Income Tax Returns (Washington, 1974); U. S. Internal Revenue Service Preliminary Report, Statistics of Income—1973 : Individual Income Tax Returns (Washington, 1975); U. S. Internal Revenue Service Preliminary Report, Statistics of Income-1974: Individual Income Tax Returns (Washington, 1976).

Numbers may not add to totals shown because these totals include interest reported on tax returns that listed no adjusted gross income.


Sources of Exchange Rate Variability: Theory and Empirical Evidencesusan schadler (pages 253-96)

Although there was considerable debate on the merits of fixed versus floating exchange rates before the advent of the current floating regime, many aspects of recent exchange rate behavior have still been puzzling. In particular, exchange rate movements have not been as smooth and mild as many flexible exchange rate advocates had predicted, and, often, exchange rate movements have seemed quite unrelated to developments on the current account. To some extent, large fluctuations in the underlying determinants of exchange rates can explain this sort of exchange rate behavior. In addition, however, recent studies of exchange rate dynamics suggest that there may be other factors in the adjustment process itself that contribute to large and sharp exchange rate changes.

This paper is an attempt to examine several theories about the dynamics of exchange rate adjustment. All of the models start from the premise that exchange rates are determined by the balancing of supply and demand for each currency and that expectations play a prime role in determining demand. The paper considers four aspects of the exchange rate adjustment process—each of which has been proposed as a source of exchange rate variability. First, the long-standing debate on stabilizing versus destabilizing speculation is re-examined. Possible patterns of exchange rate movements that might result from both extrapolative and rational expectations are shown. Then, the assumptions and exchange rate adjustment pattern implied by the asset market equilibrium approach to exchange rate determination are described. Next, the role of risk attached to holding assets denominated in particular currencies and its effect on the adjustment process is considered. Finally, some of the arguments concerning the effect of government intervention in the foreign exchange market on the behavior of the exchange rate are reviewed. No one aspect of the exchange rate adjustment considered in this paper is held to be responsible for the large exchange rate variations observed in recent years. Rather, from both an a priori consideration and empirical examinations, each of the processes considered appears to have contributed to observed exchange rate variations.

The Effect of Exchange Rate Changes on the Prices and Volume of Foreign Trade—mordechai e. kreinin (pages 297-329)

This paper utilizes the exchange rate experience of the Smithsonian Agreement period to investigate the effect of exchange rate changes on the prices of traded goods and on trade flows of the United States, Canada, Japan, and several Western European countries. In contrast to econometric investigations of the same topic, this study employs the control country approach to isolate the effect of exchange rate adjustments from the effects of other factors on the prices and volumes of traded goods. This approach necessitates the use of percentage changes (from 1970 to 1972, and from 1970 to 1973) in bilateral exchange rates and bilateral trade flows between the country under study and each of its main trading partners.

For each of the seven countries studied, the results include (1) an estimated pass-through effect of the exchange rate on imports and exports; (2) an estimated effect on the volume of imports and exports; (3) the change in the terms of trade; (4) the implied elasticities of demand for imports and of foreign demand for the country’s exports; and (5) the estimated elasticity of substitution in its market between third country suppliers for price changes occurring between 1970 and 1972, and between 1970 and 1973. The results conform well to theoretical expectations. Where comparisons are possible, they are consistent with estimates obtained by other methods.

The computations yielded (at an intermediate stage) estimates of the degree of trade overlap among exporting and importing countries. Although trade overlap is not related to the subjects covered in this article, these results may prove useful to other investigators (for example, in developing or testing theories of the commodity composition of trade); they are presented in the Appendix.

Flexible Exchange Rates: A Case for Official Interventionwilliam h.l. day (pages 330-43)

This paper argues that, in order that the exchange rate should accurately reflect private expectations, official intervention in the foreign exchange market is required to avoid any necessity for the buildup of large open positions by private speculators. The basic rationale for this view is as follows. In the absence of any official intervention, a deficit (surplus) in the basic balance of payments is necessarily accompanied by a lengthening (shortening) in the open position of private short-term capital transactors. Owing to the risk associated with an open foreign currency position, the expected appreciation of the spot rate will normally differ from the interest rate differential by a risk premium, and the forward rate will differ from the expected future spot rate by a similar risk premium. The greater is the magnitude of the accumulated basic balance of payments deficit (surplus) that has to be financed (absorbed) by private short-term capital flows, the greater will be the risk premium.

In order to prevent the development of a risk premium, the authorities should not intervene in the exchange market to set a price, but rather should intervene on a quantitative basis to finance (absorb) the basic balance of payments deficit (surplus)—that is, the authorities should make net purchases (sales) of domestic currency equal to the basic balance of payments deficit (surplus). Provided private expectations are formed on the basis of the underlying conditions of trade, such official intervention would be likely to increase the welfare of current account, and long-term capital account, transactors for the following reasons. First, the risk premium that will result in the absence of official intervention must be paid by current account and long-term capital account transactors. Second, in the absence of official intervention, variability in the exchange rate will result from changes in the level of uncertainty with which private expectations are held, even when the interest rate differential and the expected future spot rate remain unchanged. Third, only by such official intervention can it be ensured that the forward exchange rate will be an unbiased signal to private and official decision makers of the future spot rate that is expected by the market.

The findings of the paper have an important bearing on the problem of exchange rate surveillance. To the extent that private short-term capital transactors form their expectations on the basis of an accurate assessment of the underlying conditions of trade, official intervention (or nonintervention) that reduces the required open position of private short-term capital transactors is appropriate, while any intervention that increases their required open position is inappropriate.

A Model of International Investment Income Flows—marian e. bond (pages 344-79)

In this paper, a model that explains variations in income inflows and outflows for the United States, the United Kingdom, and the Federal Republic of Germany is developed and tested. All categories of investment income flows are analyzed in a consistent methodological framework that distinguishes the relevant types of asset and liability. Both permanent and transitory components of earnings are incorporated in the model, and a distinction is made between the determinants of earnings and those of income flows. Speculative activity involved in moving funds across frontiers is explicitly modeled, and the adjustments of income flows to changes in earnings are incorporated in the study. In addition, the homogeneity property (according to which average and marginal returns are equal) is tested.

The implications of the results for balance of payments policy measures are threefold. First, most estimates of the permanent rate of return coefficients are significant and may, therefore, be used in quantitative assessments of the effects of interest rate policies on the investment income account. Second, the size of individual coefficients of the cyclical (or transitory) variable suggests that investment income flows are particularly responsive to cyclical conditions, and that expansionary or contractionary policies are likely to have a significant impact on the investment income account. Third, inflows and outflows of investment income respond to expected changes in exchange rates. Therefore, government policies that lead speculators to expect exchange rates to change will accordingly have an effect on the investment income account.

Recent Developments in the World Cotton Market and the Future Outlookleyla u. ecevit (pages 380-404)

The world’s most widely used textile fiber, cotton, has been subject to severe competition from man-made substitutes, which are produced basically from petroleum derivatives. After continuously losing its market share to man-made fibers for several decades, cotton regained some ground during 1974 and 1975. This recovery coincided with (1) sharply lower cotton prices following the upsurge in 1973, and (2) stagnation in man-made fiber consumption, owing mostly to the economic recession in the industrialized world. During 1976, cotton prices rose sharply until July and remained near these high levels for the rest of the year as a result of reduced supplies. The prices of man-made fibers, on the other hand, were kept at very competitive levels, raising the question (as yet unanswered) of further penetration of the textile market by man-made fibers, especially by the fastest-growing, polyester.

This study provides some background information on recent developments related to the world production and consumption of cotton, changes in prices as a result of interactions between supply and demand, stock adjustments, and international trade. It explains the increased volatility of the cotton market in the 1970s and large fluctuations in prices; it notes the changing shares of different countries in world production and mill consumption of cotton during the past decade; and it gives a brief summary of the recent history of man-made fibers. The paper then presents a regression analysis of world cotton consumption with semiannual data from the first half of 1958 to the second half of 1975. The explanatory variables are the following: deflated prices of cotton and polyester, time, and consumption itself—all lagged by one year. For mill consumption in industrialized countries, an indicator of the business cycle in these countries is used as an additional explanatory variable. The projections obtained by extrapolating from these regression equations suggest that mill consumption of cotton in industrialized countries will stagnate during 1977, following the moderate increase in 1976, and recover in 1978. World consumption of cotton, which has a long-term increasing trend (in contrast to the slightly decreasing one for the industrialized countries), is projected to increase further during 1977, but at a reduced rate. Some increase in the growth rate is indicated for 1978. These projections, however, do not directly take into account the limited availability of cotton, which could restrict cotton use in the near future because of the extreme tightness of supplies.

Summary Measures of Fiscal Influences—sheetal k. chand (pages 405-49)

This paper sets up guidelines for the use of alternative summary measures in the appraisal of fiscal policy under differing conditions with respect to both the economy and the objectives of policy.

The frequently employed budget balance rule for evaluating fiscal policy is rejected as being of limited usefulness, since it does not distinguish the effects of the budget on the economy from those of the economy on the budget. Three national measures that undertake the required adjustment in budget balances (but from a full-employment point of view and employing a Keynesian definition of the budget balance) are examined.

The measures each focus on a different aspect of budgetary impact. Together they provide a comprehensive evaluation indicating (a) the extent to which the budget diverges from its full-employment profile (U. S. full-employment balance); (b) whether or not the budget is countercyclical (German cyclical effect of the budget); and (c) the changing stance of the budget, whether expansionary or otherwise (Dutch budget impulse). While each of the measures retains a comparative advantage with regard to its central focus, it is found that, under certain transformations, the measures are approximately interchangeable and that, in fact, any one of the measures may be used for a comprehensive evaluation.

The remainder of the paper relaxes certain of the underlying assumptions in the three national measures. These appear best suited to environments where the “crowding out” response of private sector expenditure to direct government borrowing is low, and where readily employable resources exist. Alternative liquidity balance measures are proposed for monetarist environments. A simple liquidity balance measure is also outlined for evaluating the inflationary repercussions of a budget in supply-constrained situations.

Possible uses of alternative measures, including conditional assessments of fiscal adequacy, are illustrated through case studies of an industrial and a developing economy, respectively.

The Treatment of Indirect Taxation in Econometric Models: An Analytical Survey—nurun n. choudhry (pages 450-99)

Specification of indirect taxation in econometric models is a difficult undertaking, mainly because of the intricate linkages required to transmit changes in indirect tax rates into the behavioral responses of the market. The two major sources of difficulty are (1) the problem of aggregation of indirect taxation in consumption and price equations to provide most of the required linkages, and (2) the problem of transmitting changes in indirect tax rates into price changes in order to account for dynamic incidence.

This paper employs analytical illustrative examples to focus on the problems of aggregation and dynamic incidence of indirect taxation in econometric models. It highlights the fact that the aggregation of indirect taxation, although it is linked with the general problem of aggregation of production and consumption activities, requires consistent sets of macro- behavioral relationships and prices in models. The discussion of dynamic incidence concentrates on the specification of indirect taxation in price equations in the context of disequilibrium price and wage behavior.

Next, it investigates the treatment of aggregation of indirect taxes in the IS-LM frameworks of some of the existing econometric models, placing particular emphasis on their specification in the price equations. Despite the differences among econometric models, the paper finds that the disaggregation of indirect taxes is insufficient relative to both the level of disaggregation of consumption and the corresponding prices in most models. The differential incidence of indirect taxation, which has much policy appeal, is thus limited in most models.

Finally, the paper analyzes the dynamic incidence of indirect taxation in the context of the Phillips curves in the econometric models. The analysis suggests that most models show different patterns of dynamic incidence, produced by changes in indirect tax rates, and allow feedback between their Phillips curves and IS-LM structures.

Inflation and the Incidence of Income Taxes on Interest Income: Some Results for the United States, 1972-74vito tanzi (pages 500-13)

When a country enters a period of inflation, the nominal rate of interest that would leave a lender with his preinflation real interest income, and a borrower with his preinflation real cost of borrowing, must be r*, which can be expressed as r*=r+a1t where r is the zero-inflation interest rate, a is the actual rate of inflation, and t is the rate at which interest income is taxed. As t differs among individuals and income classes, r* also varies among them. However, the interest rate received by individuals is uniform. Thus, some classes gain or lose more than others.

Using United States data provided by the Internal Revenue Service for 24 income classes, the r*s are calculated for each class for the 1972-74 period, during which inflation rose from an annual rate of 3.3 to 11.0 per cent. These required rates are then compared with the actual rates, as well as with the rates of inflation, to determine whether given income classes gained or lost owing to the income tax treatment of interest incomes and costs. It is then shown that the gainers were the middle-income classes, who were, on balance, substantial borrowers; their interest costs simply lagged behind inflation over the period.

Finally, the paper also shows whether the government was a net gainer or loser as a consequence of the tax treatment of interest income and interest deductions. For each income class, the net interest received or paid was multiplied by the effective average tax rate. If the class was a net borrower, the result was a loss to the government; if the class was a net lender, it was a gain. It is thus shown that the government was definitely a net gainer from the inflationary upsurge of 1972-74.


Sources des variations de taux de change : analyse de la théorie et observation empiriquesusan schadler (pages 253-96)

Bien qu’on ait largement débattu des avantages comparés des taux de change fixes et des taux de change flottants longtemps avant l’apparition du régime actuel de flottement des monnaies, maints.aspects du comportement récent des taux de change ont continué à être intrigants. En particulier les mouvements des taux de change n’ont pas été aussi souples et aussi modérés que de nombreux partisans des taux de change flottants l’avaient prévu, et souvent il semble que les mouvements des taux de change so soient accomplis sans relation avec l’évolution du compte courant. Dans une certaine mesure, de fortes fluctuations des facteurs sous-jacents qui déterminent les taux de change peuvent expliquer ce type de comportement des taux de change. Mais des études récentes de la dynamique des taux de change donnent à penser que d’autres facteurs dans le processus d’ajustement lui-même peuvent contribuer à accroître l’amplitude et la brusquerie des mouvements des taux de change.

L’auteur de l’essai s’est proposé d’examiner plusieurs conceptions de la dynamique de l’ajustement des taux de change. Tous les modèles partent de l’hypothèse que les taux de change sont déterminés par l’équilibre de l’offre et de la demande de chaque monnaie et que les attentes jouent un rôle primordial dans la détermination de la demande. L’auteur de l’essai envisage successivement quatre aspects du processus d’ajustement des taux de change qui, chacun, ont été envisagés comme une source éventuelle des fluctuations des taux de change. Il commence par réexaminer la question longtemps débattue du rôle stabilisateur ou perturbateur de la spéculation. Il indique les structures possibles des mouvements des taux de change qui peuvent résulter d’attentes fondées sur l’extrapolation et d’attentes rationnelles. Il décrit ensuite les suppositions et le type d’ajustement des taux de change qu’implique la détermination de taux de change par l’équilibre du marché des monnaies. Ensuite, il examine le rôle du risque attaché à la détention d’avoirs libellés en des monnaies particulières et à ses effets sur le processus d’ajustement. Enfin, il passe en revue quelques- unes des conceptions du rôle de l’intervention de l’Etat sur le marché des changes et de ses effets sur le comportement des taux de change. Aucune des formes d’ajustement des taux de change considérées dans cet essai ne doit être tenue pour responsable des fortes fluctuations des taux de change observées ces dernières années. Le raisonnement a priori et l’observation empirique font au contraire présumer que chacun des processus envisagés a contribué aux fluctuations des taux de change observées.

L’effet des modifications du taux de change sur les prix et le volume du commerce extérieurmordechai e. kreinin (pages 297-329)

La présente étude utilise l’expérience gagnée durant la période des Accords de Washington pour découvrir las effets des modifications du taux de change sur les prix des marchandises faisant l’objet d’échanges internationaux et sur les flux commerciaux des Etats-Unis, du Canada, du Japon et de plusieurs pays de l’Europe occidentale. Contrairement aux enquêtes économétriques consacrées au même sujet, la présente étude utilise la méthode du pays témoin afin d’isoler les effets des ajustements du taux de change de ceux des autres facteurs sur le prix et le volume des marchandises échangées. Cette méthode nécessite l’utilisation de variations en pourcentage (de 1970 à 1972 et de 1970 à 1973) des taux de change et des flux commerciaux bilatéraux entre le pays étudié et chacun de ses principaux partenaires commerciaux.

Pour chacun des sept pays étudiés, les résultats comprennent : 1) le degré de répercussion du taux de change sur les importations et les exportations; 2) un effet estimé sur le volume des importations et des exportations; 3) le changement des termes de l’échange; 4) les élasticités implicites de la demande d’importations et de la demande étrangère des exportations du pays en question et 5) l’élasticité de substitution estimée sur le marché de ce pays entre les fournisseurs de pays tiers en fonction des modifications de prix survenues entre 1970 et 1972, et entre 1970 et 1973. Les résultats correspondent bien à ce qu’on en attendait sur le plan théorique. Lorsqu’il est possible de faire des comparaisons, on constate qu’elles sont compatibles avec les estimations obtenues par d’autres méthodes.

Les calculs ont donné (à un stade intermédiaire) des estimations du degré de chevauchement du commerce entre les pays exportateurs et les pays importateurs. Bien que le chevauchement du commerce n’ait rien à voir avec les questions étudiées dans le présent article, ces résultats pourraient être utiles à d’autres chercheurs (par exemple pour développer ou tester des théories de la composition du commerce par marchandises); ils sont présentés en annexe.

Taux de change flexibles : une raison pour intervenir officiellement sur le marché des changeswilliam h. l. day (pages 330-43)

L’auteur de cet essai soutient que, pour que le taux de change reflète fidèlement les attentes des particuliers, une intervention officielle sur le marché des changes peut être nécessaire pour prévenir l’accumulation de fortes positions ouvertes par les agents qui opèrent sur le marché du capital à court terme. Cette opinion se fonde sur le raisonnement suivant. En l’absence d’intervention officielle, un déficit (excédent) de la balance de base des paiements s’accompagne nécessairement d’un allongement (raccourcissement) de la position ouverte des agents qui opèrent sur le marché du capital à court terme. En raison du risque associé à une position ouverte en devises, l’appréciation attendue du taux au comptant différera normalement de l’écart entre le taux d’intérêt d’une prime de risque, et le taux à terme différera du taux au comptant futur attendu d’une prime de risque analogue. Plus le déficit (l’excédent) accumulé de la balance des paiements qui doit être financé (absorbé) par des flux de capitaux privés à court terme est important, plus la prime de risque sera élevée.

Afin d’empêcher l’apparition d’une prime de risque, les autorités devraient intervenir sur le marché des changes non pour y fixer un prix, mais, sur une base quantitative, pour financer (absorber) le áéñcit (l’excédent) de la balance des paiements, c’est-à-dire que les autorités devraient faire des achats (ventes) nets de monnaie nationale en quantité égale au déficit (à l’excédent) de la balance des paiements. Si les attentes des particuliers se fondent sur les conditions réelles du commerce, il est probable que les parties à des transactions en compte courant et les parties à des transactions en compte capital bénéficieront les unes et les autres de cette intervention officielle. Il y a à cela trois raisons. D’abord la prime de risque qui naîtra en l’absence d’intervention officielle devra être supportée par ceux qui opèrent en compte courant et par ceux qui opèrent en compte capital à long terme. Ensuite, en l’absence d’intervention officielle, les taux de change fluctueront avec le degré d’incertitude des attentes des particuliers, même lorsque l’écart entre le taux d’intérêt et le taux au comptant futur attendu par le marché demeurera inchangé. Enfin, seule l’intervention officielle peut garantir que le taux de change à terme sera pour les intéressés, et d’ailleurs aussi pour les autorités appelées à prendre des décisions, une indication objective du taux au comptant futur attendu par le marché.

Les conclusions du présent article ont une grande importance pour le problème de la surveillance des taux de change. Dans la mesure où les opérateurs sur capitaux privés à court terme fondent leurs attentes sur une évaluation exacte des conditions réelles du commerce, l’intervention (ou la non-intervention) officielle qui réduit la position ouverte exigée des parties à des transactions sur capitaux privés à court terme se justifie, alors que l’intervention qui augmente leur position ouverte ne se justifie pas.

Un modèle des flux internationaux de revenu des investissementsmarian e. bond (pages 344-79)

Dans ce document, l’auteur développe et teste un modèle expliquant les fluctuations des entrées et sorties de revenu pour les Etats-Unis, la République fédérale d’Allemagne et le Royaume-Uni. Les diverses catégories de flux de revenu des investissements sont analysées dans un cadre méthodologique cohérent et une distinction est établie entre les types d’actifs et d’engagements pertinents à l’analyse. Le modèle prend en compte les composantes permanentes et temporaires des revenus totaux des investissements et établit une distinction entre les facteurs déterminants de ces revenus et ceux des revenus transférés. Les opérations spéculatives relatives aux transferts de capitaux d’un pays à un autre sont introduites de manière spécifique dans le modèle et les ajustements des flux de revenus aux variations des revenus toutaux sont inclus dans l’étude. L’auteur effectue en outre un test de la propreté d’homogénéité (en vertu de laquelle les rendements moyens et marginaux sont égaux).

Les implications du modèle, en ce qui concerne les mesures relatives à la balance des paiements, sont triples. Premièrement, la plupart des estimations des coefficients du taux de rendement permanent sont significatives et peuvent donc être utilisées pour évaluer de manière quantitative l’incidence des politiques de taux d’intérêt sur le compte revenu des investissements. Deuxièmement, l’importance des différents coefficients de la variable conjoncturelle (ou temporaire) indique que les flux de revenu des investissements réagissent fortement à la conjoncture et que les politiques expansionnistes ou d’austérité ont vraisemblablement une incidence significative sur le compte revenu des investissements. Troisièmement, les entrées et sorties de revenu des investissements réagissent aux variations prévues des taux de change. En conséquence, les politiques conduisant les spéculateurs à anticiper des modifications des taux de change influent sur le compte revenu des investissements.

Evolution récente du marché mondial du coton et perspectives d’avenirleyla u. ecevit (pages 380-404)

La fibre textile, dont l’usage est le plus répandu dans le monde, le coton, est vivement concurrencée par les produits de remplacement artificiels et synthétiques qui sont fabriqués à partir des dérivés du pétrole. Après s’être laissé continuellement supplanter par les fibres artificielles et synthétiques pendant plusieurs décennies, le coton a regagné du terrain en 1974 et 1975. Ce redressement a coïncidé avec 1) la très forte baisse des prix du coton qui a suivi la montée en fleche enregistrée en 1973 et 2) la stagnation de la consommation de fibres artificielles, due principalement à la récession écono-mique qui a sévi dans les pays industrialisés. Durant l’année 1976, les prix du coton ont connu une très forte progression jusqu’en juillet et sont demeurés près de ces niveaux élevés pour le reste de l’année par suite d’une réduction des approvisionnements. En revanche, les prix des fibres artificielles ont été maintenus à des niveaux extrêmement compétitifs, posant ainsi la question (à laquelle on n’a pas encore répondu) d’une nouvelle pénétration du marché des textiles par les fibres artificielles, notamment par le polyester qui connaît la progression la plus rapide.

La présente étude fournit quelques renseignements de base sur les développements récents liés à la production et à la consommation mondiales de coton, aux variations de prix résultant des interactions de l’offre et de la demande, aux ajustements de stocks et au commerce international. Elle explique l’instabilité accrue du marché du coton dans les années soixante- dix et les fortes fluctuations des prix; elle note l’évolution des parts des différents pays dans la production mondiale et la consommation industrielle de coton au cours de la dernière décennie; et elle décrit rapidement l’histoire des fibres artificielles et synthétiques. L’étude présente alors une analyse de régression de la consommation mondiale de coton de la fin du premier semestre de 1958 jusqu’au second semestre de 1975. Les variables explicatives sont les prix réels du coton et du polyester, le temps, et la consommation de coton elle-même, toutes décalées d’une année. En ce qui concerne l’utilisation du coton dans les pays industrialisés, un indicateur du cycle économique dans ces pays est introduit comme variable explicative suppléméntaire. Les projections obtenues par extrapolation à partir de ces équa-tions de régression indiquent que la consommation industrielle de coton dans les pays industrialisés stagnera en 1977, à la suite de la modeste augmentation enregistrée en 1976, et qu’elle repartira en 1978. La consommation mondiale de coton, qui a une tendance croissant à long terme (par contraste avec la tendance légèrement décroissante pour les pays industrialisés), doit s’accélérer en 1977 mais à un rythme réduit. Une certaine augmentation du taux de croissance est prévue pour 1978. Ces projections ne prennent cependant pas directement en considération l’approvisionnement limité en coton qui pourrait en restreindre l’usage dans le proche avenir par suite de l’existence d’un marché extrêmement tendu.

Mesures sommaires de l’incidence budgétairesheetal k. chand (pages 405-49)

La présente étude établit des directives pour l’utilisation de différentes mesures sommaires visant à évaluer la politique budgétaire en fonction de conditions et d’objectifs économiques différents.

Le critère de solde budgétaire fréquemment employé pour évaluer la politique budgétaire est écarté en raison de son utilité limitée, car il ne permet pas de dissocier les effets du budget sur l’économie de ceux de l’économie sur le budget. L’auteur examine les méthodes de mesure utilisées dans trois pays pour effectuer l’ajustement voulu des soldes budgétaires (mais en se plaçant du point de vue du plein emploi et en utilisant une définition keynésienne du solde budgétaire global).

Chacune des méthodes de mesure employées insiste sur un aspect différent de l’incidence du budget. Elles permettent, ensemble, d’évaluer de façon complète cette incidence en répondant aux questions suivantes : a) dans quelle mesure le budget s’écarte-t-il de la courbe de plein emploi (solde budgétaire de plein emploi aux Etats-Unis); b) le budget est-il anti-cyclique ou non (effet cyclique du budget en Allemagne); c) quel est le changement intervenu dans l’orientation du budget, est-il expansionniste ou non (calcul de l’impulsion budgétaire aux Pays-Bas). S’il est vrai que chaque méthode de mesure présente un certain avantage compte tenu de son objectif propre, on constate que, sous réserve de certaines modifications, ces méthodes sont presque interchangeables et que, en fait, l’une ou l’autre peut être utilisée pour obtenir une évaluation complète.

Dans le reste de l’étude, l’auteur abandonne certaines des hypothèses sur lesquelles reposent les trois méthodes employées. En effet, ces dernières lui paraissent convenir le mieux dans des situations où l’effet d’éviction exercé par les emprunts publics directs sur les dépenses du secteur privé est faible, et où il existe un volant de ressources facilement mobilisables. L’auteur propose d’autres mesures fondées sur le solde de liquidité dans des contextes monétaristes. Il indique une mesure simple du solde de liquidité qui permet d’évaluer les répercussions inflationnistes d’un budget dans des conditions où des contraintes pèsent sur l’offre.

L’auteur donne ensuite deux exemples concrets d’utilisation des méthodes de mesure indiquées, en prenant le cas d’une économie industrielle et d’une économie en développement, et en tire des conclusions, soumises à certaines conditions, sur le volume souhaitable du budget.

Le traitement des impôts indirects dans les modèles économétriques : aperçu analytiquenurun n. choudhry (pages 450-99)

La spécification des impôts indirects dans les modèles économétriques est une tâche ardue, en raison notamment des enchaînements complexes nécessaires pour que les modifications des taux d’imposition aient un retentissement sur les réactions des mécanismes du marché. Les deux principales sources de difficultés sont : 1) le problème de l’agrégation des grandeurs de l’imposition indirecte dans les équations de consommation et de prix afin de fournir la plupart des relations requises, et 2) le problème de la détermination des mécanismes par lesquels les modifications des taux d’imposition exercent leurs effets sur les variations des prix, pour expliquer l’incidence dynamique.

L’auteur utilise des exemples concrets pour mettre en lumière les pro-blèmes d’agrégation et d’incidence dynamique que posent les impôts indirects dans les modèles économétriques. Il souligne le fait que l’agrégation des grandeurs de l’imposition indirecte, bien qu’elle soit inséparable du problème général de l’agrégation des actvités de production et de consommation, exige l’adjonction dans les modèles d’ensembles cohérents de relations de macro-comportement et de prix. L’analyse de l’incidence dynamique est centrée sur la spécification des impôts indirects dans les équations de prix dans le contexte du comportement des agents économiques quand les marchés des biens et main-d’œuvre sont en déséquilibre.

L’auteur examine ensuite le traitement de l’agrégation des impôts indirects dans les structures IS-LM, retenues par quelques modèles économétriques existants, et met notamment l’accent sur leur spécification dans les équations de prix. Malgré les différences d’un modèle économétrique à l’autre, l’auteur estime que la désagrégation des impôts indirects n’est pas assez poussée par rapport au degré de désagrégation réalisé dans la plupart des modèles sur les volets tant de la consommation que des prix correspondants. De ce fait, l’incidence différentielle de l’imposition indirecte — outil très prisé en politique économique — est limitée dans presque tous les modèles.

Pour terminer, l’auteur analyse l’incidence dynamique de l’imposition indirecte selon la relation de Philips dans les modèles économétriques. Il note que la plupart des modèles présentent divers schémas d’incidence dynamique avec décalages variant entre les modifications dans les taux d’imposition et leurs effets sur la structure des prix; permettent aussi une réeroaction entre leur relation de Philips et leurs structures IS-LM.

L’inflation et l’incidence de l’impôt sur le revenu provenant du loyer de l’argent : quelques chiffres enregistrés aux Etats-Unis, 1972-74 — vito tanzi (pages 500-13)

Lorsqu’un pays aborde une période d’inflation, le taux nominal d’intérêt qui procurerait au prêteur le revenu réel que celui-ci tirait jusqu’alors du loyer de son argent et qui aboutirait, pour l’emprunteur, à un coût réel identique à celui de son emprunt avant l’inflation doit être égal à r*; on peut exprimer ce taux par l’équation r*=r+a1t dans laquelle r est le taux d’intérêt dans une situation sans inflation, a le taux d’inflation effectif et t le taux d’imposition du revenu provenant du loyer de l’argent. Etant donné que t diffère selon les particuliers et les classes de revenus, il en va de même pour r*. Cependant, le taux d’intérêt que reçoivent les particuliers est uniforme. Certaines classes gagnent ou perdent donc plus que d’autres.

On a calculé les r*, pour chaque classe, pour la période 1972-74, pendant laquelle le taux annuel d’inflation est passé de 3,3 à 11 pour 100 par an, en utilisant les données relatives aux Etats-Unis que fournit 1’ “Internal Revenue Service” pour 24 classes de revenus. On a ensuite comparé les r* ainsi obtenus aux taux d’intérêt effectifs, ainsi qu’aux taux d’inflation afin de déterminer si des classes données ont gagné ou perdu du fait du régime fiscal accordé aux revenus et aux coûts du loyer de l’argent. Il ressort de cette comparaison que les gagnants ont été les classes à revenue moyen qui, dans l’ensemble, ont emprunté des montants importants; le coût des intérêts qu’elles ont versés a augmenté à un taux inférieur à celui de l’inflation au cours de la période considérée.

Enfin, l’étude permet également de dire si le régime fiscal appliqué au revenu provenant du loyer de l’argent ou aux déductions permises au titre de l’intérêt a entraîné, pour l’Etat, un gain ou une perte nette. Pour chaque classe de revenu, l’intérêt net reçu ou payé a été multiplié par le taux d’imposition moyen effectif. Si la classe donnée était un emprunteur net, il en résultait une perte pour l’Etat, et un gain si elle était un prêteur net. Ceci démontre donc que la poussée inflationniste de 1972-74 a bien été, pour l’Etat, la source d’un gain net.


Fuentes de variabilidad del tipo de cambio: Teoría y pruebas empíricassusan schadler (páginas 253-96)

Aunque hubo amplia discusión en torno a las ventajas respectivas de los tipos de cambio fijos y flexibles antes del advenimiento del actual régimen de flotación, no pocos aspectos del comportamiento reciente de los tipos de cambio siguen siendo desconcertantes. En particular, las alteraciones de los tipos de cambio no han sido tan suaves y módicas como habían predicho muchos defensores de los tipos de cambio flexibles y, a menudo, no parecían guardar relación alguna con la evolución de la cuenta corriente. En cierta medida, este tipo de comportamiento puede explicarse por las amplias fluctuaciones experimentadas por los factores básicos determinantes del tipo de cambio. Pero, además, tal vez existan otros factores en el proceso mismo de ajuste que propicien amplias y acusadas variaciones de los tipos de cambio, como se desprende de recientes investigaciones acerca de la dinámica del tipo de cambio.

Este estudio trata de analizar varias teorías relativas a la dinámica del ajuste del tipo de cambio. Todos los modelos parten de la base de que los tipos de cambio están determinados por el equilibrio entre la oferta y la demanda de cada moneda, y que las expectativas desempeñan un papel primordial en la determinación de la demanda. Se analizan aquí cuatro aspectos del proceso de ajuste del tipo de cambio, cada uno de los cuales había sido presentado como fuente de variabilidad del tipo de cambio. En primer lugar, se analiza de nuevo el tan debatido tema de si la especulación estabiliza o desestabiliza, y se indican los posibles géneros de alteración del tipo de cambio que pudieran resultar de las expectativas tanto racionales como fundadas en la extrapolación. Se describen luego los supuestos y comportamiento del ajuste del tipo de cambio en que se bases el enfoque del equilibrio del mercado de activos para determinar el tipo de cambio. A continuación se estudia el papel desempeñado por el riesgo inherente a la tenencia de activos expresados en monedas determinadas, y su efecto sobre el proceso de ajuste. Por último, se pasa revista a algunos de los argumentos relativos al efecto que la intervención de las autoridades en el mercado de divisas puede producir en el comportamiento del tipo de cambio. A ninguno de los aspectos del ajuste del tipo de cambio analizados en este estudio se le considera responsable de las amplias variaciones de los tipos de cambio observadas durante los últimos años. Por el contrario, en base tanto a consideraciones apriorísticas como al análisis empírico, cada uno de los procesos examinados parece haber contribuido a las variaciones observadas en los tipos de cambio.

El efecto de las variaciones del tipo de cambio sobre los precios y el volumen del comercio exteriormordechai e. kreinin (páginas 297-329)

Este estudio se basa en la experiencia de tipos de cambio del período correspondiente al Acuerdo del Smithsonian, para analizar el efecto de las variaciones del tipo de cambio sobre los precios de los bienes intercambiados, así como sobre los flujos comerciales de Estados Unidos, Canadá, Japón y varios países de Europa occidental. A diferencia de las investigaciones econométricas sobre el mismo tema, este estudio adopta el enfoque del “país de referencia” para aislar de los efectos de los demás factores el efecto de las variaciones de tipo de cambio sobre los precios y volúmenes de los bienes intercambiados. Este enfoque requiere el uso de variaciones porcentuales (de 1970 a 1972 y de 1970 a 1973) en los tipos de cambio bilaterales y en los flujos de comercio bilateral entre el país analizado y cada uno de los principales países con quienes comercia.

Los resultados para cada uno de los siete países estudiados incluyen: 1) una estimación del efecto de las variaciones de los tipos de cambio traspasado a las importaciones y exportaciones; 2) el efecto estimado sobre el volumen de importación y exportación; 3) la variación de la relación de intercambio; 4) las elasticidades implícitas de la demanda de importaciones así como de la demanda extranjera de exportaciones procedente del país considerado, y 5) la elasticidad estimada de sustitución en su propio mercado, entre abastecedores de terceros países, derivada de las variaciones experimentadas por los precios entre 1970 y 1972, y entre 1970 y 1973. Hay gran correlación entre los resultados y la esperanza teórica. Cuando se puede hacer comparaciones, concuerdan éstas con las estimaciones logradas por otros métodos.

Los cálculos arrojaron (en su fase media) estimaciones del grado de traslapo comercial entre países exportadores a importadores. Aunque el traslapo comercial no guarda relación con los temas tratados en este artículo, estos cálculos pueden resultarles útiles a otros investigadores (por ejemplo al desarrollar o experimentar teorías relativas a la composición del comercio por productos), y quedan expuestos en el Apéndice.

Tipos de cambio flexibles: Argumento a favor de la intervención oficialwilliam h. l. day (páginas 330-43)

En este estudio se sostiene que, a fin de que el tipo de cambio refleje con exactitud las expectativas privadas, se requiere la intervención oficial en el mercado de divisas de modo que los especuladores privados no tengan necesidad de acumular grandes posiciones sin cobertura. El razonamiento fundamental de este punto de vista es el siguiente: a falta de intervención oficial, un déficit (superávit) en la balanza de pagos básica va necesariamente acompañado de un aumento (reducción) de la posición sin cobertura de las personas privadas que realizan transacciones de capital a corto plazo. Debido al riesgo relacionado con una posición de divisas sin cobertura, la prevista apreciación de tipo al contado será normalmente distinta del diferencial del tipo de interés en la cuantía de la prima de riesgo, y el tipo a término se diferenciará del previsto tipo futuro al contado en una prima de riesgo semejante. Mientras mayor sea la magnitud de los déficit (superávit) acumulados de la balanza de pagos básica que tengan que financiarse (absorberse) con flujos de capital privado a corto plazo, mayores serán las primas de riesgo.

A fin de evitar que se produzca una prima de riesgo, las autoridades no deben intervenir en el mercado cambiario para fijar un precio, sino más bien deben intervenir en términos cuantitativos con objeto de financiar (absorber) los déficit (superávit) de la balanza de pagos básica, es decir, las autoridades deben efectuar compras (ventas) netas de moneda nacional que sean iguales a los déficit (superávit) de la balanza de pagos básica. Siempre que las expectativas privadas se formen sobre la base de las condiciones fundamentales del comercio, dicha intervención oficial probablemente aumentará las ventajas de los que realizan transacciones de cuenta corriente, y de cuenta de capital a largo plazo por las siguientes razones. En primer lugar, de no haber intervención oficial, estos particulares tendrían que pagar la prima de riesgo que se produciría a falta de dicha intervención. En segundo lugar, también en esas circunstancias el tipo de cambio estaría sujeto a variabilidad, debido a la mayor o menor incertidumbre en que se mantienen las expectativas privadas, aun cuando el diferencial del tipo de interés y el previsto tipo futuro al contado permanezcan al mismo nivel. En tercer lugar, sólo mediante dicha intervención oficial puede garantizarse que, para los que toman decisiones en los sectores privado y oficial, el tipo de cambio a término constituirá una indicación sin sesgo del tipo futuro al contado previsto por el mercado.

Los resultados que se han obtenido con este estudio tienen importancia para el problema de supervisión de los tipos de cambio. En la medida en que los que realizan transacciones de capital privado a corto plazo formen sus expectativas sobre la base de una evaluación precisa de las condiciones básicas del comercio, será adecuada la intervención oficial (o la no intervención) que reduzca la requerida posición sin cobertura de los que realizan transacciones de capital privado a corto plazo, mientras que no lo será la que aumente dicha requerida posición.

Un modelo de los flujos internacionales de la renta de la inversiónmarian e. bond (páginas 344-79)

En este estudio se formula y verifica un modelo que explica las variaciones de las entradas y de las salidas de la renta en Estados Unidos, el Reino Unido y la República Federal de Alemania. Todas las categorías de los flujos de la renta de la inversión se analizan en un marco metodológico coherente con los correspondientes desgloses de activos y pasivos. Se incorporan en el modelo las utilidades permanentes y transitorias y se distinguen los factores determinantes de éstas y de los flujos de renta. Se incluye explícitamente la actividad especulativa involucrada en el movimiento de fondos a través de fronteras y se incorporan los adjustes de los flujos de renta ante las variaciones de las utilidades. Se verifica la propiedad de homogeneidad (según la cual las rentabilidades media y marginal son iguales).

Los resultados presentan tres consecuencias relacionadas con medidas de balanza de pagos. Primero, la mayor parte de las estimaciones de la tasa permanente de los coeficientes de rentabilidad es significativa, de modo que es posible utilizarlas en evaluaciones cuantitativas de los efectos de las políticas de tasas de interés en la cuenta de la renta de la inversión. Segundo, la magnitud de los distintos coeficientes de la variable cíclica (o transitoria) sugiere que los flujos de la renta de la inversión son especialmente sensibles a las condiciones cíclicas, y las políticas expansionistas o contractivas tienen probablemente un impacto importante en la cuenta de la renta de la inversión. Tercero, las entradas y salidas de la renta de la inversión reaccionan ante las variaciones de los tipos de cambio. En consecuencia, las políticas gubernamentales que inducen a los especuladores a prever modificaciones de los tipos de cambio tienen un efecto en la cuenta de la renta de la inversión.

Evolución reciente del mercado mundial del algodón y perspectivas futurasleyla u. ecevit (páginas 380-404)

El algodón, la fibra textil de uso más general en el mundo, ha venido sufriendo una intensa competencia por parte de los sustitutos químicos, cuya producción se funda en los derivados del petróleo. Después de perder continuamente su mercado durante varios decenios frente a las fibras químicas, el algodón se recuperó algo en 1974 y 1975. Esta recuperación coincidió con: a) unos precios del algodón notablemente inferiores, después del alza de 1973 y b) un estancamiento del consumo de fibras químicas, debido en su mayor parte a la recesión económica del mundo industrializado. En 1976, los precios del algodón subieron pronunciadamente hasta el mes de julio y se mantuvieron, durante el resto del año cerca de los altos niveles alcanzados como consecuencia de la oferta reducida. Por otra parte, los precios de las fibras químicas se mantuvieron a niveles muy competitivos, planteando la cuestión (aún por resolver) de la penetración de las fibras químicas en el mercado textil, especialmente por el poliéster, la fibra de más rápida y extensa aceptación.

En el estudio que nos ocupa se facilitan algunos antecedentes de los últimos acontecimientos relativos a la producción y consumo mundiales de algodón, la modificación de los precios a consecuencia de la interacción de la oferta y la demanda, el ajuste de existencias y el comercio internacional. Se explica la inestabilidad creciente del mercado del algodón en la década de 1970 y las grandes fluctuaciones de los precios; se pone de relieve la variación de las distintas partes proporcionales de los países en la producción y consumo textil de algodón en el mundo, durante el decenio último, haciéndose un breve resumen de la historia reciente de las fibras químicas. En el trabajo se presenta luego un análisis de regresión del consumo mundial de algodón con datos semestrales desde le primer semestre de 1958 al segundo de 1975. Las variables explicativas son las siguientes : los precios deflactados del algodón y el poliéster, el tiempo y el propio consumo—, todas ellas con desfase de un año. Respecto al consumo fabril en países industrializados, se utiliza, como variable explicativa complementaria, el indicator del ciclo económico en esos países. Las proyecciones obtenidas extrapolando estas ecuaciones de regresión indican que el consumo textil de algodón en los países industriales sufrirá un marasmo en 1977, tras el pequeño aumento de 1976, y se restablecerá en 1978. El consumo mundial de algodón, con tendencia creciente a largo plazo (en contraste con la tendencia ligeramente decreciente en los países industriales), experimentará, según lo proyectado, un aumento ulterior en 1977, pero a una tasa reducida. Para 1978 está indicada cierta subida de la tasa de crecimiento. Ahora bien, en estas proyecciones, no se tiene directamente en cuenta la limitada disponibilidad de algodón, que podría restringir su uso en un futuro immediato, debido a la extrema escasez de la oferta.

Medidas generales de la influencia fiscalsheetal k. chand (páginas 405-49)

En este trabajo se presentan normas para el uso de variantes de medidas generales en la evaluación de la política fiscal según diferentes condiciones con respecto a la economía y a objetivos de política.

Se rechaza la regla del saldo presupuestario empleada frecuentemente para evaluar la política fiscal por ser de utilidad limitada, puesto que en dicho método no se distingue entre los efectos del presupuesto en la economía y los de ésta en el presupuesto. Se examinan tres medidas nacionales con las que se lleva a efecto el ajuste necesario de los saldos presupuestarios (desde el punto de vista del empleo pleno y aplicando la definición keynesiana de saldo presupuestario).

Cada una de las medidas se centra en un aspecto diferente del impacto presupuestario. Juntas proporcionan una evaluación amplia que indica a) el grado en que el presupuesto se separa de la situación de pleno empleo (saldo de pleno empleo de EE.UU.); b) si el presupuesto es o no contracíclico (efecto cíclico del presupuesto alemán), y c) la variación de la situación del presupuesto, si es o no expansionaría (incentivo del presupuesto holandés). Aunque cada una de las medidas mantiene una ventaja comparativa con respecto a su interés central, se llega a la conclusión de que, con ciertas transformaciones, las medidas pueden más o menos intercambiarse y que, de hecho, cualquiera de ellas puede usarse para una evaluación general.

En el resto del trabajo se abandonan algunos de los supuestos básicos de las tres medidas nacionales. Estas parecen ser más adecuadas en medios donde son bajos los efectos de expulsión del mercado de los gastos del sector privado frente a los préstamos directos obtenidos por el gobierno, y donde existen recursos fácilmente utilizables. Se proponen variantes de medidas de saldos de liquidez para ambientes monetaristas. También se hace un esbozo de una simple medida de saldo de liquidez para evaluar las repercusiones inflacionarias de un presupuesto en situaciones de restricción de la oferta.

Como ejemplos de posibles usos de variantes de medidas, incluso la evaluación condicional de la suficiencia fiscal, se presentan estudios de casos de una economía industrial y de una economía en desarrollo.

El trato de la tributación indirecta en los modelos econométricos: Examen analíticonurun n. choudhry (páginas 450-99)

Le especificación de las funciones de tributación indirecta en los modelos econométricos constituye una difícil tarea, principalmente debido a las complejas relaciones necesarias para que las variaciones de las tasas de los impuestos indirectos se reflejen en cambios de comportamiento del mercado. La dificultad tiene dos causas principales: 1) el problema de la agregación de los impuestos indirectos en las ecuaciones de consumo y precios de modo de incluir la mayoría de las relaciones requeridas, y 2) el problema de transmitir las variaciones de las tasas de los impuestos indirectos en cambios de precios para tener en cuenta la incidencia dinámica.

En este estudio se emplean ejemplos analíticos para enfocar los problemas de la agregación e incidencia dinámica de la tributación indirecta en los modelos econométricos. Se hace resaltar el hecho de que la agregación de los impuestos indirectos, aunque vinculada con el problema general de agregación de las actividades de producción y consumo, requiere conjuntos compatibles de relaciones de comportamiento macroeconómico y de precios en los modelos. El examen de la incidencia dinámica se centra en la especificación de la tributación indirecta en las ecuaciones de los precios en el contexto del comportamiento de precios y salarios en disequilibrio.

A continuación se investiga el trato que se da a la agregación de los impuestos indirectos en las estructuras ahorro-inversión (AI) y liquidez-dinero (LD) de algunos de los modelos econométricos existentes, dándosele importancia especial a su especificación en las ecuaciones de los precios. Pese a la variedad de modelos econométricos, en el trabajo se llega a la conclusión de que la desagregación de los impuestos indirectos en la mayoría de los modelos es insuficiente en relación con el nivel de desagregación tanto del consumo como de los precios correspondientes. La incidencia diferencial de los impuestos indirectos, que tiene un gran atractivo para fines de política económica, es, por tanto, limitada en la mayoría de los modelos.

Por último, en el trabajo se analiza la incidencia dinámica de los impuestos indirestos en el contexto de las curvas de Phillips en los modelos econométricos. El análisis sugiere que la mayoría de los modelos reflejan diferentes tipos de incidencia dinámica, producidos por cambios en las tasas de los impuestos indirectos, y permiten efectos de interacción entre las curvas de Phillips y las estructuras AI-LD.

La inflación y la incidencia de los impuestos sobre la renta en los ingresos por concepto de intereses: Algunos resultados respecto a Estados Unidos, 1972-74vito tanzi (páginas 500-13)

Cuando un país entra en período de inflación, el tipo nominal de interés en virtud del cual el ingreso real por concepto de intereses que recibe el prestamista y el costo real del préstamo para el prestatario seguirían siendo iguales al ingreso y costo anteriores a la inflación tiene que ser r*, que puede expresarse como r*=r+a1t, donde r es el tipo de interés si la inflación es igual a cero, a es la tasa real de inflación y t es la tasa a que se grava el ingreso por concepto de intereses. Puesto que t se diferencia entre personas y grupos d ingreso, r* también varía de la misma manera. Sin embargo, el tipo de interés que las personas reciben es uniforme. Por tanto, algunos grupos tienen ganancias o pérdidas mayores que otros.

Usando datos de Estados Unidos proporcionados por el Servicio de Impuestos Internos relativos a 24 grupos de ingreso, se ha calculado la r* correspondiente a cada grupo para el período 1972–74, durante el cual la inflación se elevó de una tasa anual de 3,3 por ciento a la da 11 por ciento. Estos tipos estimados se comparan entonces con los tipos reales, así como con las tasas de inflación, para establecer si determinados grupos de ingresos ganaron o perdieron debido al trato tributario dado a los ingresos y costos por concepto de intereses. Se demuestra entonces que resultaron beneficiados los grupos de ingreso medio que fueron, en general, prestatarios en cuantía apreciable; sus costos en cuanto a intereses sencillamente quedaron a la zaga de la inflación durante el período.

Por último, en el trabajo también se trata de determinar si el gobierno tuvo ganancias o pérdidas netas como consecuencia del trato tributario dado al ingreso y a las deducciones por concepto de intereses. Para cada grupo de ingreso, el interés neto recibido o pagado se multiplicó por la tasa tributaria efectiva media. En el caso de los grupos que terminan siendo prestatarios netos, el resultado fue de una pérdida para el gobierno; en el de los prestamistas netos, resultó ser una ganancia. Se demuestra entonces que el gobierno definitivamente obtuvo ganancias netas durante el período inflacionario 1972-74.

In statistical matter (except in the résumés and resúmenes) throughout this issue,

Dots (…) indicate that data are not available;

A dash (—) indicates that the figure is zero or less than half the final digit shown, or that the item does not exist;

A singe dot (.) indicates decimals;

A comma (,) separates thousands and millions;

“Billion” means a thousand million;

A short dash (-) is used between years or months (e.g., 1971-74 or January-October) to indicate a total of the years or months inclusive of the beginning and ending years or months;

A stroke (/) is used between years (e.g., 1973/74) to indicate a fiscal year or a crop year;

Components of tables may not add to totals shown because of rounding.

International Monetary Fund, Washington, D.C. 20431 U.S.A.

Telephone number: 202 393 6362

Cable address: Interfund


The System Under Stress

Volume I: Narrative; Volume II: Documents

by Margaret Garritsen de Vries

Problems of the international monetary system have been among the leading economic issues in the past decade, and there has been an increased interest in the International Monetary Fund. This history, based on the Fund’s records and documents, describes these problems and the Fund’s evolution in the six years 1966 through 1971. It was written by a long-time member of the Fund staff.

Volume I, Narrative, in its opening section traces the negotiations leading to the creation of a new reserve asset with the establishment in the Fund of a facility based on special drawing rights (SDRs). It describes the heavy recourse to the Fund’s financial resources by its members, the expansion of quotas, and changes in the Fund’s policies regarding the use of its resources. The following section explains the onset in the late 1960s and early 1970s of the severe crises in gold markets and in exchange rates that eventually resulted in the breakdown of the world monetary system established at Bretton Woods. A final section explains how the Fund grew and changed as an international institution, taking on a number of new responsibilities and activities, primarily in the fields of technical assistance and training.

Volume II, Documents, makes available for the first time seven draft outlines of reserve-creating schemes that were prepared in the Fund as part of the process by which SDRs were established, and includes also the most important documents that the Fund published from 1966 until the end of 1971.

These volumes are a sequel to three volumes published earlier, The International Monetary Fund, 1945-1965: Twenty Years of International Monetary Cooperation.

Vol. I: 699 pp.; Vol. II: 339 pp.

Price: $15.00 the set; Vol. I, $11.00; Vol. II, $6.00. Equivalent amounts in most currencies accepted.

For information and to place orders, write to The Secretary, International Monetary Fund, Washington, D.C. 20431 U.S.A.


Mr. Tanzi, Chief of the Tax Policy Division of the Fiscal Affairs Department, is a graduate of Harvard University. He was formerly a professor and Chairman of the Economics Department at American University. He is the author of The Individual Income Tax and Economic Growth and of numerous chapters in books and articles in professional journals.


See Vito Tanzi, “Inflation, Indexation and Interest Income Taxation,” Banca Nazionale del Lavoro, Quarterly Review, Vol. 29 (March 1976), pp. 64-76; Michael R. Darby, “The Financial and Tax Effects of Monetary Policy on Interest Rates,” Economic Inquiry, Vol. 13 (June 1975), pp. 226-76; Martin Feldstein, “Inflation, Income Taxes, and the Rate of Interest: A Theoretical Analysis.” American Economic Review, Vol. 66 (December 1976), pp. 809-20.


In a noninflationary situation, r and r* would be the same. In a steady-state economy characterized by inflation, the equilibrium rate of interest would have to be equal to the required rate. However, such an equilibrium rate, if it existed, would depend not only on the tax rate on individuals’ incomes but also on the rate of the corporate income tax.


If the individual suffers from money illusion, his subjective evaluation of the situation may differ from an objective one and he may feel better or worse off than he actually is. Also, it must be reiterated that these statements concern the individual only in relation to his lending and borrowing activities. Inflation will obviously affect him in other ways, so that the total effect of inflation may be beneficial or damaging to him.


Whether the nominal rate approaches some sort of required rate in the real world is an open empirical question. I have dealt with such an issue in my paper, “Real, Fisherian, and Required Rates of Interest Under Inflationary Conditions: Theoretical and Empirical Results” (unpublished, International Monetary Fund, December 17, 1975) (hereinafter referred to as Tanzi, “Real, Fisherian, and Required Rates”). So far, the empirical tests available for a few countries indicate that nominal rates have not risen to the required level.


See Tanzi, “Real, Fisherian, and Required Rates” (also cited in footnote 4), p. 8. The empirical tests were carried out using a weighted average tax rate on interest income.


Throughout this paper, it is assumed that interest paid is a deductible expense as far as the determination of taxable income is concerned. This is true in the United States and in most other countries. However, it is not completely true in a few countries where there are limitations on the amounts that can be deducted.


More detailed and individualized estimates could probably be derived from the micro files of the Brookings Institution.


Adjusted gross income is defined as gross income from all sources subject to tax, adjusted to reflect allowances for business expenses.


Taxable income is defined as AGI minus personal deductions and personal exemptions.


Furthermore, one can argue that lending comes from saving, which is a residual. This line of argument relies on the assumption that it is the marginal, and not the average, rate that is more important in determining whether individuals save or lend.


For corporations that are taxed at approximately 50 per cent, the α1ti ratio would have been 6.6 per cent in 1972, 12.4 per cent in 1973, and 22.0 per cent in 1974.


It should also be mentioned that the rates shown in Table 3 relate to new loans. Those who had loaned (or borrowed) money in earlier years were probably receiving (or paying) somewhat lower rates.


To the extent that the corporate sector is a net borrower, it must also have gained from the tax treatment of interest income between 1972 and 1974.


U. S. Internal Revenue Service, Statistics of Income, 1972: Individual Income Tax Returns (Washington, 1974), p. 277.


In 1974, interest paid by state and local governments amounted to $9.4 billion. About half of this was received by banks. See Survey of Current Business, Vol. 56 (January 1976), Table 17, p. 44, and U. S. Advisory Commission on Intergovernmental Relations, Understanding the Market for State and Local Debt (Washington, 1976).


It may be pointed out that personal interest income in the national accounts data was much higher than interest received in the Internal Revenue Service data. The Internal Revenue Service estimates were 36.7 per cent (1972), 36.4 per cent (1973), and 37.9 per cent (1974) of the estimates of interest income in the national accounts for the years specified. Since 1966, this proportion has generally been increasing.


Obviously these conclusions apply to classes as a whole. Within each class some taxpayers are net debtors and some are net creditors. Therefore, the above conclusions are not necessarily applicable to each individual.


As the rates at which the incomes of the various classes are taxed vary, whether the U. S. Government gains or loses depends to a large extent on where the interest incomes and the interest deductions accrue.


It should again be emphasized that these are very partial conclusions. They relate strictly to the tax treatment of interest income.


See Tanzi, “Inflation, Indexation and Interest” (also cited in footnote 1), and Feldstein, op. cit.