“Does Inequality Cause Inflation? The Political Economy of Inflation, Taxation and Government Debt”
“The optimal revenue mix is tilted more towards seigniorage if the ruling political party has less of a dislike for inflation, if the costs of collecting taxes are high and the extent of tax evasion is widespread (cf. Canzoneri and Rogers, 1990), and if the financial system is relatively repressed (e.g., Roubini and Sala-i-Martin, 1992). Inflation will then be relatively high and income tax rates relatively low. If the central bank is not independent and the government cannot commit itself to the announced future monetary stance, discretion rather than rules is the relevant outcome so that seigniorage will be relatively more important than tax revenues (Barro and Gordon, 1983; Barro, 1983; van der Ploeg, 1991). Lack of monetary discipline and credibility thus provide an additional incentive for inflation in a situation of outstanding nominal government debt or nominal wage contracts.” Read more.
“Does Inequality Cause Inflation? The Political Economy of Inflation, Taxation and Government Debt”
Roel M. W. J. Beetsma and Frederick Van Der Ploeg
Public Choice, Vol. 87, No. 1/2 (Apr., 1996), pp. 143-162.
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