The effects of inflation are worked out for a small open economy with Cash-in-Advance (CIA) constraints on bond purchases. If all transactions are subject to CIA constraints, an increase in the inflation rate will reduce savings, bringing about a current account deficit, while the capital stock...

How do changes in inflation and financial market development affect the size of the shadow economy? Previous studies show that lowering the tax rate, coupled with increasing the level of tax enforcement through policing and imposing high penalties for tax evasion may reduce the size of the...