Abstract
This paper examines the interactive effects of inflation and taxation on the international allocation of capital using an open-economy monetary growth model. The joint effects of inflation and taxation on international capital flows, the economy-wide debt-equity ratio, and the various balance of payments accounts are explicitly modeled. Elements of the analysis include the important issue of investment finance, an integrated tax structure, and depreciation accounting. It is found that inflation weakens the current account position. Also, the effects of inflation on capital intensity are, in general, sensitive to the method of investment finance. [431]
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