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On the Use of the Inflation Tax when Non-Distortionary Taxes are Available


Joydeep Bhattacharya


Iowa State University - Department of Economics

Joseph Haslag


University of Missouri at Columbia - Department of Economics

Review of Economic Dynamics, Forthcoming

Abstract:     
Using a pure-exchange overlapping generations model in which money is valued because of a legal restriction, we show the following: a) a benevolent government may make some use of the inflation tax in conjunction with a lump-sum tax on the young but not if lump-sum taxes on the old are available, and b) the welfare-maximizing monetary policy may deviate from the Friedman rule (contract the money supply so as to equate the real return on money and other competing stores of value) in either case.

Keywords: Inflation tax, Friedman rule, reserve requirements, optimal taxation

JEL Classification: E4, E5, E6

Accepted Paper Series


Date posted: July 23, 2001  

Suggested Citation

Bhattacharya, Joydeep and Haslag, Joseph, On the Use of the Inflation Tax when Non-Distortionary Taxes are Available. Review of Economic Dynamics, Forthcoming. Available at SSRN: http://ssrn.com/abstract=272108

Contact Information

Joydeep Bhattacharya (Contact Author)
Iowa State University - Department of Economics ( email )
260 Heady Hall
Ames, IA 50011
United States
515-294-5886 (Phone)
515-294-0221 (Fax)
Joseph Haslag
University of Missouri at Columbia - Department of Economics ( email )
118 Professional Building
Columbia, MO 65211
United States
Feedback to SSRN (Beta)


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