Autore
HERRENDORF, Berthold

Titolo
Seigniorage, optimal taxation, and time consistency: a review
Periodico
European University Institute of Badia Fiesolana (Fi). Department of Economics - Working papers
Anno: 1994 - Fascicolo: 17 - Pagina iniziale: 1 - Pagina finale: 48

This paper reviews the existing literature on seigniorage, optimal taxation, and time consistency. An extension of the simple optimal taxation m odel of M ankiw (1987) serves as the unifying framework. Particular emphasis is put on the derivation of the consolidated public sector flow budget constraint from the government budget constraint and the central bank profit and loss account and balance sheet. With in this framework, it is shown that a slightly modified version of the Persson, Persson and Svensson (1987) solution to the time consistency problem, that is, specific ways of debt structure management, is not only necessary but also sufficient for optimality. However, this will not necessarily be true in more general models [Calvo and Obstfeld (1990).] In addition, the different recommendations of the public finance literature on optimal inflation, notably the Friedman (1969) rule of constant deflation, positive inflation, or seigniorage maximizing inflation, are shown to be specific time consistent solutions to the optimal tax problem. The model is deliberately kept as simple as possible to make the analysis accessible for non-specialists.



Testo completo: http://hdl.handle.net/1814/497

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