The Optimal Inflation Tax
Banco de Portugal, Universidade Católica Portuguesa
Monetary general equilibrium model with money in the utility function (Sidrauski-Brock type) and explicit transactions technology equivalence, analyzing optimal inflation tax under second-best taxation without lump-sum taxes
linear production technology with unitary coefficients
Section 2.1, Proposition 1, p.332
Ramsey second best: Friedman rule optimal when satiation point m*=infinity or m*=kc (unitary elasticity); zero nominal interest rate
Main theoretical result of the paper: Proposition 1 establishes Friedman rule as optimal in second best Ramsey problem