Optimality of the Friedman rule in economies with distorting taxes

Article Abstract:

Three standard monetary economic models were analyzed to determine the optimality of the Friedman rule. The Friedman rule postulates that monetary policy is optimized when interest rates are zero. Phelps, however, has contended that all goods should be taxed in case governments decide to increase revenues through distorting taxes. The models studied were the cash-credit, money-in-the-utility-function and shopping time. It was concluded that the Friedman rule was optimal in the three models with distorting taxes and that there was no relationship between the Friedman rule's optimality and the interest elasticity of money demand.

Economic aspects, Monetary policy, Taxation, Production (Economics), Money demand

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Balanced-budget rules and macroeconomic (in)stability

Article Abstract:

Under perfect competition and constant returns-to-scale, a one-sector real business cycle model may exhibit indeterminacy and sunspots when income tax rates are determined by a balanced-budget rule with a pre-set level of government expenditures. It is shown that the indeterminacy disappears if the government finances endogenous public spending and transfer with fixed income tax rates.

Public Finance Activities, Forecasts, trends, outlooks, Expenditures-Total Govt, Expenditures-State Govt, Competition (Economics), Forecasts and trends, Market trend/market analysis, Expenditures, Public, Public expenditures, Business cycles

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Financial crises as herds: Overturning the critiques

Article Abstract:

A study is conducted to investigate that recent critique of early herd models can be overturned when the exogenous timing of investment decisions in the models replaced by a more natural endogenous timing.

Analysis, Investment management, Financial crises, Market timing

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