Discussion Paper
The optimal inflation tax
Abstract: We determine the second best rule for the inflation tax in monetary general equilibrium models where money is dominated in rate of return. The results in the literature are ambiguous and inconsistent across different monetary environments. We compare the derived optimal inflation tax solutions across the different environments and find that Friedman's policy recommendation of a zero nominal interest rate is the right one.
Keywords: Inflation (Finance); Taxation;
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Bibliographic Information
Provider: Federal Reserve Bank of Minneapolis
Part of Series: Discussion Paper / Institute for Empirical Macroeconomics
Publication Date: 1997
Number: 123