Optimality of the Friedman rule in economies with distorting taxes

Varadarajan Chari (), Lawrence Christiano () and Patrick J. Kehoe ()

No 158, Staff Report from Federal Reserve Bank of Minneapolis

Abstract: We find conditions for the Friedman rule to be optimal in three standard models of money. These conditions are homotheticity and separability assumptions on preferences similar to those in the public finance literature on optimal uniform commodity taxation. We show that there is no connection between our results and the result in the standard public finance literature that intermediate goods should not be taxed.

Keywords: Interest rates; Monetary policy; Taxation (search for similar items in EconPapers)
Date: 1993
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Related works:
Working Paper: Optimality of the Friedman Rule in Economies with Distorting Taxes (1993)
Journal Article: Optimality of the Friedman rule in economies with distorting taxes (1996)
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