No abstract.

In contrast to the recent literature on the optimal inflation tax, we show that, in models where money reduces transactions costs, it is optimal to set the inflation tax to zero when seigniorage is replaced by revenue from distortionary taxes. The main reasons for this result are that the...

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...

We study environments with sticky prices, wages, or portfolios where it is feasible and optimal to use monetary policy to replicate the allocation under full flexibility. In these environments the optimal policy does not depend on the scope of the frictions. In this sense, the strength of the...