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Optimal Monetary Policy, Taxes, and Public Debt in an Intertemporal Equilibrium
Author(s) -
Crettez Bertrand,
Michel Philippe,
Wigniolle Bertrand
Publication year - 2002
Publication title -
journal of public economic theory
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.809
H-Index - 32
eISSN - 1467-9779
pISSN - 1097-3923
DOI - 10.1111/1467-9779.00099
Subject(s) - economics , debt , overlapping generations model , friedman rule , monetary economics , monetary policy , capital (architecture) , fiscal policy , general equilibrium theory , macroeconomics , capital income , cash , public economics , tax reform , history , archaeology , international taxation
This article is devoted to a study of the optimal monetary and fiscal policies within the framework of an overlapping generations model with cash‐in‐advance constraints. We first characterize the intertemporal equilibrium. Then we show how to decentralize the optimal growth path using available policy instruments (i.e., labor income and capital taxes, public debt, money supply). Between the four instruments: wages and capital taxes, debt and monetary policy, one is redundant among the three last which implies that the Friedman Rule is only a special case.