The adoption of the inflation target regime raises the question of the determinationof the target to be aimed. Monetary models show that this rate is negative and almostzero. However, countries have adopted a target of inflation between 2%-3%. The goalof this paper is to include a fiscal restriction in the problem of central bank to showthat the optimal target of inflation may be positive and depends on the weight thatcentral bank puts on fiscal equilibrium.
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Paper provided by Instituto de Pesquisa Econômica Aplicada - IPEA in its series Discussion Papers with number
1152.