This paper analyzes the interaction of inflation with the tax code and its contribution to aggregate fluctuations. We find significant effects operating through the tax on realized nominal capital gains. A tax on nominal bond income magnifies these effects. Our innovation is to combine monetary...

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 compare the derived optimal inflation tax solutions...

Using a new approach, we reexamine the empirical evidence on the long-term interactions between inflation and real variables. We find, using over 100 years of U.S. data, that in the long run the effect of inflation on investment and output is positive (a "Tobin type effect") and the investment...