| Author: | Vegh, C. |
| Title: | Inflationary finance and currency substitution in a public finance framework |
| Journal: | Journal of International Money and Finance
1995 : OCT, VOL. 14:5, p. 679-694 |
| Index terms: | PUBLIC FINANCE INFLATION CURRENCY |
| Language: | eng |
| Abstract: | This paper analyzes the impact of currency substitution on inflationary finance in a public finance framework. It is shown that if foreign money balances can be taxed (or subsidized), the optimal inflation tax is always zero. In the more realistic case in which foreign money cannot be taxed, the optimal inflation tax is positive whenever there are revenue needs. Moreover, the optimal inflation tax is an increasing function of government spending and the foreign nominal interest rate, claims in his paper Carlos Vegh. |
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