TY  - JOUR
AU  - Sinn,Hans-Werner
TI  - The Non-Neutrality of Inflation for International Capital Movements
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 3219
PY  - 1991
Y2  - August 1991
UR  - http://www.nber.org/papers/w3219
L1  - http://www.nber.org/papers/w3219.pdf
N1  - Author contact info:
Hans-Werner Sinn
Ifo Institute -
Leibniz Institute for Economic Research
at University of Munich
Poschingerstr. 5
81679 Munich
GERMANY
Tel: 49-89-21802748
Fax: 49-89-397303;49-89-8506434 (home)
E-Mail: sinn@ifo.de
AB  - This paper studies the question of how unilateral changes in the rate of inflation affect the international allocation of capital. Presenting a model that incorporates a transaction motive for money holding and capital income taxation with historical cost accounting, it counters the view that inflation will be neutral in a world of perfect foresight and costless arbitrage: under mild conditions, domestic inflation will unambiguously induce a capital export. The paper includes a discussion of the Fisher effect. The empirical observation of a less than one-to--one translation of inflation into nominal interest rates is shown to be compatible with the model, and in fact the capital export turns out to be stronger the lower the degree of translation.
ER  -