Optimal fiscal and monetary policy in an economy without capital Export

@article{citeulike:949870, abstract = {This paper is concerned with the structure and time-consistency of optimal fiscal and monetary policy in an economy without capital. In a dynamic context, optimal taxation means distributing tax distortions over time in a welfare-maximizing way. For a barter economy, our main finding is that with debt commitments of sufficiently rich maturity structure, an optimal policy, if one exists, is time-consistent. In a monetary economy, the idea of optimal taxation must be broadened to include an `inflation tax', and we find that time-consistency does not carry over. An optimal `inflation tax' requires commitment by `rules' in a sense that has no counterpart in the dynamic theory of ordinary excise taxes. The reason time-consistency fails in a monetary economy is that nominal assets should, from a welfare-maximizing point of view, always be taxed away via an immediate inflation in a kind of `capital levy'. This emerges as a new possibility when money is introduced into an economy without capital.}, author = {Lucas, Jr and Stokey, Nancy L.}, citeulike-article-id = {949870}, citeulike-linkout-0 = {http://dx.doi.org/10.1016/0304-3932(83)90049-1}, citeulike-linkout-1 = {http://www.sciencedirect.com/science/article/B6VBW-45GSFPT-2W/2/1f3f4e8be45a1cbf410355a2f9f7f35e}, doi = {10.1016/0304-3932(83)90049-1}, journal = {Journal of Monetary Economics}, keywords = {411-1}, number = {1}, pages = {55--93}, posted-at = {2006-11-17 07:16:23}, priority = {2}, title = {Optimal fiscal and monetary policy in an economy without capital}, url = {http://dx.doi.org/10.1016/0304-3932(83)90049-1}, volume = {12}, year = {1983} }

TY - JOUR ID - citeulike:949870 L3 - citeulike-article-id:949870 N2 - This paper is concerned with the structure and time-consistency of optimal fiscal and monetary policy in an economy without capital. In a dynamic context, optimal taxation means distributing tax distortions over time in a welfare-maximizing way. For a barter economy, our main finding is that with debt commitments of sufficiently rich maturity structure, an optimal policy, if one exists, is time-consistent. In a monetary economy, the idea of optimal taxation must be broadened to include an `inflation tax', and we find that time-consistency does not carry over. An optimal `inflation tax' requires commitment by `rules' in a sense that has no counterpart in the dynamic theory of ordinary excise taxes. The reason time-consistency fails in a monetary economy is that nominal assets should, from a welfare-maximizing point of view, always be taxed away via an immediate inflation in a kind of `capital levy'. This emerges as a new possibility when money is introduced into an economy without capital. IS - 1 JF - Journal of Monetary Economics EP - 93 TI - Optimal fiscal and monetary policy in an economy without capital VL - 12 SP - 55 KW - 411-1 AU - Lucas, Jr AU - Stokey, Nancy PY - 1983/// UR - http://dx.doi.org/10.1016/0304-3932(83)90049-1 ER -