The Optimal Inflation Tax

Isabel Correia () and Pedro Teles

Review of Economic Dynamics, 1999, vol. 2, issue 2, 325-346

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 derive and compare the 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. (Copyright: Elsevier)

Keywords: Friedman rule; inflation tax (search for similar items in EconPapers)
JEL-codes: E31 E41 E58 E62 (search for similar items in EconPapers)
Date: 1999
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Citations: View citations in EconPapers (53)

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DOI: 10.1006/redy.1998.0040

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