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Optimality of the Friedman Rule in Economies with Distorting TaxesVaradarajan V. ChariUniversity of Minnesota - Twin Cities - Department of Economics; Federal Reserve Bank of Minneapolis; National Bureau of Economic Research (NBER) Lawrence J. ChristianoNorthwestern University; Federal Reserve Bank of Cleveland; Federal Reserve Bank of Chicago; Federal Reserve Bank of Minneapolis; National Bureau of Economic Research (NBER) Patrick J. KehoeFederal Reserve Bank of Minneapolis - Research Department; University of Minnesota - Twin Cities - Department of Economics; National Bureau of Economic Research (NBER) August 1993 NBER Working Paper No. w4443 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.
Number of Pages in PDF File: 27 working papers seriesDate posted: July 10, 2007Suggested CitationContact Information
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