Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/152472
Authors: 
De Fiore, Fiorella
Year of Publication: 
2000
Series/Report no.: 
ECB Working Paper 38
Abstract: 
Tax collection costs have been advocated in the literature as a reason to deviate from the Friedman rule, in standard general equilibrium monetary models with flexible prices. This paper shows that there are conditions under which the Friedman rule is optimal despite the presence of collection costs. When these conditions are not satisfied, the optimal inflation tax depends upon the collection costs parameter and schedule, the interest and scale elasticity of money demand, and the compensated labor supply elasticity. Numerical results obtained by calibrating the model on US data suggest that collection costs do not justify substantial departures from Friedman's prescriptions.
JEL: 
E31
E41
E58
E62
Document Type: 
Working Paper

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