We challenge the widely held belief that New Keynesian models cannot predict optimal positive inflation rates. In fact, interest rates are justified by the Phelps argument that monetary financing can alleviate the burden of distortionary taxation. We obtain this result because, in contrast with previous contributions, our model accounts for public transfers as a component of fiscal outlays. We also contradict the view that the Ramsey policy should minimize inflation volatility and induce near-random-walk dynamics of public debt in the long run. In our model it should instead stabilize debt-to-GDP ratios in order to mitigate steady-state distortions. Our results thus provide theoretical support to policy-oriented analyses which call for a reversal of debt accumulated in the aftermath of the 2008 financial crisis.
Di Bartolomeo, G., Tirelli, P., & Acocella, N. (2015). The comeback of inflation as an optimal public finance tool. INTERNATIONAL JOURNAL OF CENTRAL BANKING, 11(1), 43-70.
Citazione: | Di Bartolomeo, G., Tirelli, P., & Acocella, N. (2015). The comeback of inflation as an optimal public finance tool. INTERNATIONAL JOURNAL OF CENTRAL BANKING, 11(1), 43-70. | |
Tipo: | Articolo in rivista - Articolo scientifico | |
Carattere della pubblicazione: | Scientifica | |
Presenza di un coautore afferente ad Istituzioni straniere: | No | |
Titolo: | The comeback of inflation as an optimal public finance tool | |
Autori: | Di Bartolomeo, G; Tirelli, P; Acocella, N | |
Autori: | ||
Data di pubblicazione: | 2015 | |
Lingua: | English | |
Rivista: | INTERNATIONAL JOURNAL OF CENTRAL BANKING | |
Appare nelle tipologie: | 01 - Articolo su rivista |
File in questo prodotto:
File | Descrizione | Tipologia | Licenza | |
---|---|---|---|---|
ijcb15q1a2.pdf | N/A | Open Access Visualizza/Apri |