The Inflation Tax in an Open Economy with Imperfect Competition
This paper studies the national welfare maximizing inflation tax in an open economy with imperfect competition. It shows that the presence of a monopolistic distortion dampens the incentive to engage in strategic use of the inflation tax. If this dampening effect is strong enough, monetary policy becomes completely inward-looking, restoring the Friedman rule as an equilibrium strategy regardless of the actions of the foreign government. This aspect of the policy interaction -- driven entirely by the presence of imperfect competition -- is important because it determines the underlying structure of the policy game and is therefore crucial for determining whether or not there exist welfare gains from international monetary cooperation. (Copyright: Elsevier)
Volume (Year): 10 (2007)
Issue (Month): 1 (January)
|Contact details of provider:|| Postal: Marina Azzimonti, Department of Economics, Stonybrook University, 10 Nicolls Road, Stonybrook NY 11790 USA|
Web page: http://www.EconomicDynamics.org/red/
More information through EDIRC
|Order Information:|| Web: https://www.economicdynamics.org/subscription-information/ Email: |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Helpman, Elhanan, 1981.
"An Exploration in the Theory of Exchange-Rate Regimes,"
Journal of Political Economy,
University of Chicago Press, vol. 89(5), pages 865-90, October.
- Helpman, Elhanan, 1981. "An Exploration in the Theory of Exchange-Rate Regimes," Scholarly Articles 3445091, Harvard University Department of Economics.
- Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476, December.
- Susanto Basu & John G. Fernald, 1996.
"Returns to scale in U.S. production: estimates and implications,"
International Finance Discussion Papers
546, Board of Governors of the Federal Reserve System (U.S.).
- Basu, Susanto & Fernald, John G, 1997. "Returns to Scale in U.S. Production: Estimates and Implications," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 249-83, April.
- Robert E. Hall, 1986. "Market Structure and Macroeconomic Fluctuations," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 17(2), pages 285-338.
- Giancarlo Corsetti & Paolo Pesenti, 2001.
"Welfare and Macroeconomic Interdependence,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 116(2), pages 421-445.
- Maurice Obstfeld & Kenneth Rogoff, 1999.
"New Directions for Stochastic Open Economy Models,"
NBER Working Papers
7313, National Bureau of Economic Research, Inc.
- Maurice Obstfeld and Kenneth Rogoff., 1999. "New Directions for Stochastic Open Economy Models," Center for International and Development Economics Research (CIDER) Working Papers C99-107, University of California at Berkeley.
- Maurice Obstfeld & Kenneth Rogoff, 2000. "New Directions for Stochastic Open Economy Models," International Finance 0004002, EconWPA.
- Obstfeld, Maurice & Rogoff, Kenneth, 1999. "New Directions for Stochastic Open Economy Models," Center for International and Development Economics Research, Working Paper Series qt5pf7g8sh, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
- Thomas F. Cooley & Vincenzo Quadrini, 2003. "Common Currencies vs. Monetary Independence," Review of Economic Studies, Oxford University Press, vol. 70(4), pages 785-806.
- Russell Cooper & Hubert Kempf, 2003. "Commitment and the Adoption of a Common Currency," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(1), pages 119-142, February.
- Chari, V. V. & Christiano, Lawrence J. & Kehoe, Patrick J., 1996.
"Optimality of the Friedman rule in economies with distorting taxes,"
Journal of Monetary Economics,
Elsevier, vol. 37(2-3), pages 203-223, April.
- V. V. Chari & Lawrence J. Christiano & Patrick J. Kehoe, 1993. "Optimality of the Friedman rule in economies with distorting taxes," Staff Report 158, Federal Reserve Bank of Minneapolis.
- V. V. Chari & Lawrence J. Christiano & Patrick J. Kehoe, 1993. "Optimality of the Friedman Rule in Economies with Distorting Taxes," NBER Working Papers 4443, National Bureau of Economic Research, Inc.
- Kenneth L. Judd, 2002. "Capital-Income Taxation with Imperfect Competition," American Economic Review, American Economic Association, vol. 92(2), pages 417-421, May.
- Ireland, Peter N., 1997. "Sustainable monetary policies," Journal of Economic Dynamics and Control, Elsevier, vol. 22(1), pages 87-108, November.
- Benigno, Pierpaolo, 2002. "A simple approach to international monetary policy coordination," Journal of International Economics, Elsevier, vol. 57(1), pages 177-196, June.
When requesting a correction, please mention this item's handle: RePEc:red:issued:05-75. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Zimmermann)
If references are entirely missing, you can add them using this form.