The Optimum Quantity of Money Revisited: Distortionary Taxation in a Search Model of Money

Moritz Ritter

MPRA Paper from University Library of Munich, Germany

Abstract: This paper incorporates a distortionary tax into the microfoundations of money framework and revisits the optimum quantity of money. An optimal policy may consist of both a positive tax rate and a positive nominal interest rate: if the buyer’s surplus share is inefficiently small, the intensive margin is distorted and the constrained optimal policy combines a sales tax with a money growth rate above that prescribed by the Friedman rule. Monetary, but not fiscal, policy alters the agent’s bargaining position, leaving a special role for a deviation from the Friedman rule. Under similar conditions, this conclusion carries over to competitive pricing.

Keywords: Money; Search; Friedman Rule; Sales Tax (search for similar items in EconPapers)
JEL-codes: E62 E63 H21 (search for similar items in EconPapers)
Date: 2007-02-27
New Economics Papers: this item is included in nep-dge, nep-mac, nep-mon and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Journal Article: The Optimum Quantity of Money Revisited: Distortionary Taxation in a Search Model of Money (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:1973

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