Optimal Taxation by the Monetary Authority
Reserve requirements imposed against bank deposits, nominal interest payments on bank reserves (or on base money), and inflation can all be viewed as generating tax effects. Any analysis of optimal monetary policy in a steady-state equilibrium needs to consider the simultaneous choice of all the tax instruments controlled by the monetary authority. Such an analysis is carried out in this paper. It is shown that when the tax system is not indexed, the optimal nominal interest rate on the monetary authority's liabilities is likely to be zero. More importantly, any discussion of the payment of interest on reserves and currency must take into account the nature of the tax system and the rate of inflation in a nonindexed economy.
|Date of creation:||Jun 1984|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.nber.org
More information through EDIRC
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.:
- McCallum, Bennett T., 1983.
"The role of overlapping-generations models in monetary economics,"
Carnegie-Rochester Conference Series on Public Policy,
Elsevier, vol. 18(1), pages 9-44, January.
- Bennett T. McCallum, 1982. "The Role of Overlapping-Generations Models in Monetary Economics," NBER Working Papers 0989, National Bureau of Economic Research, Inc.
- Harry G. Johnson, 1968. "Problems of Efficiency in Monetary Management," Journal of Political Economy, University of Chicago Press, vol. 76, pages 971.
- Summers, Lawrence H., 1981.
"Optimal inflation policy,"
Journal of Monetary Economics,
Elsevier, vol. 7(2), pages 175-194.
- Brunner, Karl & Meltzer, Allan H., 1983. "Money, monetary policy, and financial institutions," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 18(1), pages 1-7, January.
- Baumol, William J & Bradford, David F, 1970. "Optimal Departures from Marginal Cost Pricing," American Economic Review, American Economic Association, vol. 60(3), pages 265-83, June.
- Clower, Robert W, 1970. "Is There an Optimal Money Supply?," Journal of Finance, American Finance Association, vol. 25(2), pages 425-33, May.
- Sandmo, Agnar, 1976. "Optimal taxation : An introduction to the literature," Journal of Public Economics, Elsevier, vol. 6(1-2), pages 37-54.
- Peter A. Diamond & J. A. Mirrlees, 1968. "Optimal Taxation and Public Production," Working papers 22, Massachusetts Institute of Technology (MIT), Department of Economics.
- Green, Jerry & Sheshinski, Eytan, 1977. "Budget Displacement Effects of Inflationary Finance," American Economic Review, American Economic Association, vol. 67(4), pages 671-82, September.
- Stockman, Alan C., 1981. "Anticipated inflation and the capital stock in a cash in-advance economy," Journal of Monetary Economics, Elsevier, vol. 8(3), pages 387-393.
- Atkinson, A. B. & Stiglitz, J. E., 1976. "The design of tax structure: Direct versus indirect taxation," Journal of Public Economics, Elsevier, vol. 6(1-2), pages 55-75.
- Johnson, Harry G, 1970. "Is There an Optimal Money Supply?," Journal of Finance, American Finance Association, vol. 25(2), pages 435-42, May.
- Alan J. Auerbach, 1982.
"Taxation, Corporate Financial Policy and the Cost of Capital,"
NBER Working Papers
1026, National Bureau of Economic Research, Inc.
- Auerbach, Alan J, 1983. "Taxation, Corporate Financial Policy and the Cost of Capital," Journal of Economic Literature, American Economic Association, vol. 21(3), pages 905-40, September.
- Benhabib, Jess & Bull, Clive, 1983.
"The Optimal Quantity of Money: A Formal Treatment,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 24(1), pages 101-11, February.
- Siegel, Jeremy J., 1978. "Notes on optimal taxation and the optimal rate of inflation," Journal of Monetary Economics, Elsevier, vol. 4(2), pages 297-305, April.
- Weiss, Laurence M, 1980. "The Effects of Money Supply on Economic Welfare in the Steady State," Econometrica, Econometric Society, vol. 48(3), pages 565-76, April.
- Drazen, Allan, 1979. "The optimal rate of inflation revisited," Journal of Monetary Economics, Elsevier, vol. 5(2), pages 231-248, April.
- Deaton, Angus, 1979. "The Distance Function in Consumer Behaviour with Applications to Index Numbers and Optimal Taxation," Review of Economic Studies, Wiley Blackwell, vol. 46(3), pages 391-405, July.
- Fama, Eugene F., 1980. "Banking in the theory of finance," Journal of Monetary Economics, Elsevier, vol. 6(1), pages 39-57, January.
- Marty, Alvin L, 1978. "Inflation, Taxes, and the Public Debt," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 10(4), pages 437-52, November.
- Helpman, Elhanan & Sadka, Efraim, 1979. "Optimal Financing of the Government's Budget: Taxes, Bonds, or Money?," American Economic Review, American Economic Association, vol. 69(1), pages 152-60, March.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:1375. 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: ()
If references are entirely missing, you can add them using this form.