Are optimal monetary and fiscal policies time consistent in a monetary economy? Yes, but if and only if under commitment the Friedman rule of setting nominal interest rates to zero is optimal. This result is of applied interest because the Friedman rule is optimal for the standard preferences used in applied work, those consistent with the growth facts. (Replaced by Staff Report No: 305)
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Paper provided by Federal Reserve Bank of Minneapolis in its series Working Papers with number
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References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Chari, V V & Kehoe, Patrick J, 1990.
"Sustainable Plans,"
Journal of Political Economy,
University of Chicago Press, vol. 98(4), pages 783-802, August.
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V.V. Chari & Patrick J. Kehoe, 1989.
"Sustainable plans,"
Staff Report
122, Federal Reserve Bank of Minneapolis.
[Downloadable!]
Isabel Correia & Pedro Teles, 1999.
"The Optimal Inflation Tax,"
Review of Economic Dynamics,
Elsevier for the Society for Economic Dynamics, vol. 2(2), pages 325-346, April.
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