Monetary Policy, Fiscal Policy, and the Inflation Tax: Equivalence Results

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Monetary Policy, Fiscal Policy, and the Inflation Tax: Equivalence Results

Please use this identifier to cite or link to this item: http://hdl.handle.net/10355/2744

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Title: Monetary Policy, Fiscal Policy, and the Inflation Tax: Equivalence Results
Author: Bhattacharya, Joydeep
Keywords: monetary regimes
fiscal regimes
equivalence
Date: 2001-09
Publisher: Department of Economics
Citation: Department of Economics, 2001
Series/Report no.: Working papers (Department of Economics);WP 01-07
Abstract: This paper clarifies and extends previous work on the equivalence between monetary regimes and fiscal regimes involving social security systems. We consider equivalence across regimes, showing that monetary regimes are equivalent to one or both of two alternative types of social security regimes. Two implications emerge. One is that financing a real expenditure by increasing the inflation rate is equivalent, across regimes, to financing the expenditure by increasing the tax rate on social security benefits. In addition, our results imply that a wide range of monetary policy actions are equivalent, across regimes, to fiscal policy actions that change the scale of the social security system and the tax rates on social security benefits and/or bank deposits.
URI: http://hdl.handle.net/10355/2744

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  • Economics publications (MU) [120]
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