Ekaterina Shabalina, Reserve Bank of Australia : Progressive Taxation and Monetary Policy in Australia

Title:  Progressive Taxation and Monetary Policy in Australia

Abstract: This paper studies how tax progressivity affects monetary policy. Through the lens of a heterogeneous agent model with nominal rigidities it shows that, firstly, higher tax progressivity increases natural rate due to a lower demand for precautionary savings. Secondly, the effect of tax progressivity on the potency of monetary policy is small with a higher progressivity implying a slightly better inflation-output trade-off. Distributional effects of monetary policy, however, are amplified with a higher tax progressivity.

Presenter: Ekaterina Shabalina, Reserve Bank of Australia

If you would like to subscribe to the Melbourne Institute Seminar Series email list, please contact us.