Monetary Policy, Fiscal Policy, and the Inflation Tax: Equivalence Results

Joydeep Bhattacharya, Joseph Haslag and Steven Russell

ISU General Staff Papers from Iowa State University, Department of Economics

Abstract: This paper clarifies and extends previous work on the equivalence between monetary regimes and fiscal regimes involving social security systems. We show that monetary regimes of the type we study are equivalent to two alternative types of social security regimes. This result has an important implication. Notably, governments can finance a real expenditure by increasing the inflation rate, or finance the expenditure by increasing the tax rate on social security benefits. Such equivalence should help us better understand the role that monetary policy plays in these economies.

Date: 2003-11-01
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Related works:
Journal Article: MONETARY POLICY, FISCAL POLICY, AND THE INFLATION TAX: EQUIVALENCE RESULTS (2003)
Working Paper: Monetary Policy, Fiscal Policy, and the Inflation Tax: Equivalence Results (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:isu:genstf:200311010800001828

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