examine the dynamic properties and the welfare implications of a set of inflation targeting policies and a group of policies … deficits, and distortions to the labor supply. Resorting to the inflation tax to finance the subsidy leads to significant … through the inflation tax are substantial. The welfare generated by the inflation targeting policies is close to the baseline …

current account and the reduction of inflation, the main cause in both cases being usually a fiscal deficit. It is shown how … is suggested. Reducing inflation involves both an inflation tax replacement and a price adjustment problem, and …