Creator: Chari, V. V., Christiano, Lawrence J., and Kehoe, Patrick J. Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 158 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.
Keyword: Inflation tax, Optimal monetary policy, and Ramsey policy Subject (JEL): E52 - Monetary Policy, E61 - Policy Objectives; Policy Designs and Consistency; Policy Coordination, and E63 - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy