TY  - JOUR
AU  - Peek,Joe
AU  - Wilcox,James A.
TI  - The Degree of Fiscal Illusion in Interest Rates:  Some Direct Estimates
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 1358
PY  - 1985
Y2  - April 1985
UR  - http://www.nber.org/papers/w1358
L1  - http://www.nber.org/papers/w1358.pdf
N1  - Author contact info:
Joe Peek
E-Mail: joe.peek@bos.frb.org

James A.. Wilcox
School of Business Administration
350 Barrows Hall
University of California, Berkeley
Berkeley, CA   94720-1900
Tel: 510-642-2455
E-Mail: jwilcox@haas.berkeley.edu
AB  - This article demonstrates why the procedures used in previous studies do not permit inference about the relationship between interestrates and taxes. We present a model that leads to direct estimates of the degree to which interest rates respond to changes in tax rates. The empirical results imply that the adjustment of taxable interest rates has been large enough to render after-tax yields impervious to tax rate changes. Further, tax-exempt yields are unaffected by changes in taxrates. Thus, there is no evidence of fiscal illusion in interest rates.
ER  -