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/lp/world-scientific-publishing-company/corporation-tax-the-exchange-rate-and-cross-border-firm-mobility-6Y3x9fAX86
- Publisher
- World Scientific Publishing Company
- ISSN
- 1793-9933
- eISSN
- 1793-9941
- DOI
- 10.1142/S1793993321500150
- Publisher site
- See Article on Publisher Site
Abstract
In this paper, we extend a new open economy macroeconomics (NOEM) model to examine the effects of a corporate tax reduction on home and foreign countries. The feature of this open economy model is that cross-border relocation of firms is allowed. We show that (i) a reduction in the home corporate tax rate induces an exchange rate appreciation (depreciation) when the degree of cross-border firm mobility is large (small) and (ii) when the degree of cross-border firm mobility is large (small), a reduction in corporate tax is beneficial (detrimental) to the domestic country but detrimental (beneficial) to the foreign country.
Journal
Journal of International Commerce, Economics and Policy – World Scientific Publishing Company
Published: Oct 30, 2021