Working Paper: NBER ID: w0526
Authors: Martin Feldstein
Abstract: This paper presents an explicit model of portfolio demand and uses it to show how the rate of inflation and its variances affect the real prices of land and of common stock. The analysis is thus an extension of two of the author's earlier papers which studied how the interaction of inflation and tax rules alter the real prices of land and stock. The analysis shows the importance of going beyond the traditional assumption that net-of-tax yields are equated for all assets.
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JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increase in expected inflation rate (E31) | increase in price of land (R52) |
| increase in expected inflation rate (E31) | increase in real after-tax rates of return on land (Q15) |
| increase in expected inflation rate (E31) | decrease in price of common stocks (G10) |
| increase in price of land (R52) | increase in price of common stocks (G19) |
| inflation (E31) | asset prices (G19) |