Optimal inflation with corporate taxation and financial constraints

• 成果类型: Article
• 署名作者: Finocchiaro, Dada; Lombardo, Giovanni; Mendicino, Caterina; Weil, Philippe
• 署名单位: Sveriges Riksbank; Bank for International Settlements (BIS); European Central Bank; Universite Libre de Bruxelles
• 刊物名称: JOURNAL OF MONETARY ECONOMICS
• ISSN/ISSBN: 0304-3932
• DOI: 10.1016/j.jmoneco.2018.02.003
• 发表日期: 2018
• 页码: 18-31
• 关键词: Optimal monetary policy; Friedman rule; Credit frictions; Tax benefits of debt

摘要

How does inflation affect the investment decisions of financially constrained firms in the presence of corporate taxation? Inflation interacts with corporate taxation via the deductibility of i) capital expenditures and ii) interest payments on debt. Through the first channel, inflation increases firms' taxable profits and further distorts their investment decisions. Through the second, expected inflation affects the effective real interest rate and stimulates investment. When debt is collateralized, the second effect dominates. Therefore, present a tax-advantage to debt financing, positive long-run inflation enhances welfare by mitigating or even eliminating the investment distortion. (C) 2018 Elsevier B.V. All rights reserved.