The optimal inflation tax is reexamined in the framework of dynamic second best economy populated by individuals with inflation aversion. A simple formula for the optimal inflation rate is derived. Different from the literature, it is shown that if the marginal excess burden of other distorting...

In this paper we argue that the relevant decision for the majority of US households is not the fraction of assets to be held in interest-bearing form, but whether to hold such assets at all (we call this ‘the decision to adopt’ financial technology). We show that the key variable governing...

This paper studies the efficient taxation of money and factor income in intertemporal optimizing growth models with infinite horizons, transaction costs technologies and flexible prices.  Second-best optimality calls for a positive inflation tax and a non-zero capital income tax when there are...

This paper models an overlapping-generations economy that includes money and is populated with individuals of different skills. They face a nonlinear income tax schedule and can engage in tax evasion. Money serves two purposes: the traditional one, modeled through a...

This paper models a two-period overlapping-generations economy with money populated with individuals of different skills. They face a nonlinear income tax schedule and can engage in tax evasion. Money serves two purposes: the traditional one, modeled through a money-in-the-utility-function; it...

In this paper, we test whether public preferences for price stability (obtained from the Eurobarometer survey) are actually reflected in the interest rates set by eight central banks. We estimate augmented Taylor (1993) rules for the period 1976-1993 using the dynamic GMM estimator. We find,...

In this paper, we test whether public preferences for price stability (obtained from the Eurobarometer survey) were actually reflected in the interest rates set by eight central banks. We estimate augmented Taylor (1993) rules for the period 1976Q2–1994Q1 using the dynamic GMM estimator. We...

Inflation has been well contained over the last decades in most industrialized countries. This implies, however, that memories of high inflation are likely to fade, because over time larger parts of the population have never experienced high inflation, whereas those who have might forget. This...

This paper reviews theory and evidence of the welfare effects of inflation from a costbenefit perspective. Basic models and selected empirical results are discussed. Historically, in assessing the welfare effects of inflation, the distortion of money demand played a prominent role. More...

The Friedman rule is strongly immune to most model modifications although it has not actually been observed. The Friedman rule implicitly assumes that a government is perfectly under the control of the representative household. This paper shows that, if a government is not perfectly under the...