TY  - JOUR
AU  - Desai, Mihir A
AU  - Hines, James R, Jr.
TI  - Excess Capital Flows and the Burden of Inflation in Open Economies
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 6064
PY  - 1997
Y2  - June 1997
DO  - 10.3386/w6064
UR  - http://www.nber.org/papers/w6064
L1  - http://www.nber.org/papers/w6064.pdf
N1  - Author contact info:
Mihir A. Desai
Graduate School of Business Administration
Harvard University
Soldiers Field
Boston, MA 02163
Tel: 617/495-6693
Fax: 617/496-6592
E-Mail: mdesai@hbs.edu

James R. Hines
Department of Economics
University of Michigan
343 Lorch Hall
611 Tappan Street
Ann Arbor, MI  48109-1220
Tel: 734/764-2320
Fax: 734/764-2769
E-Mail: jrhines@umich.edu
M1  - published as Mihir A. Desai, James R. Hines, Jr.. "Excess Capital Flows and the Burden of Inflation in Open Economies," in Martin Feldstein, editor, "The Costs and Benefits of Price Stability" University of Chicago Press (1999)

AB  - This paper estimates the efficiency consequences of interactions between nominal tax systems and inflation in open economies.  Domestic inflation changes after-tax real interest rates at home and abroad, thereby stimulating international capital movement and influencing domestic and foreign tax receipts, saving, and investment.  The efficiency costs of inflation-induced international capital reallocations are typically much larger than those that accompany inflation in closed economies, even if capital is imperfectly mobile internationally.  Differences between inflation rates are responsible for international capital movements and accompanying deadweight losses, suggesting that international monetary coordination has the potential to reduce the inefficiencies associated with inflation-induced capital movements.
ER  -