The Friedman Rule in a Two Sector Small Open Economy

No 530, Econometric Society 2004 North American Summer Meetings from Econometric Society

Abstract: This paper investigates the properties of optimal monetary and fiscal policy in a two sector small open economy. If the government can optimally select all possible distorting tax rates, then it can implement Pareto efficient outcomes and the Friedman Rule is found to be a necessary condition for this. If the government can select only some of these tax rates, then second best policies may also display the Friedman rule as a feature. However, this last result depends on the set of tax instruments the government can choose from

Keywords: Friedman rule; optimal taxation; open economy (search for similar items in EconPapers)
JEL-codes: E43 E52 E63 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mon
Date: Written 2004-08-11
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