The role of central bank independence on optimal taxation and seigniorage

Roberto Delhy Nolivos and Guillermo Vuletin

European Journal of Political Economy, 2014, vol. 34, issue C, 440-458

Abstract: Should inflation be thought of as “just another tax?” The theoretical basis for doing so dates back to Phelps (1973) and has been greatly refined ever since. Since optimal taxation minimizes the deadweight loss by equalizing the marginal distortions of all available taxes, including the inflation tax, a key distinctive theoretical implication obtained by these models is that inflation and tax rates have a positive relationship. While theoretically appealing, empirical studies find virtually no support for this key implication.

Keywords: Optimal taxation; Inflation tax; Seigniorage; Central bank independence; Fiscal and monetary policy coordination (search for similar items in EconPapers)
JEL-codes: E31 E52 E63 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (20)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:poleco:v:34:y:2014:i:c:p:440-458

DOI: 10.1016/j.ejpoleco.2013.09.010

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