Jesús Vázquez, María-José Gutiérrez
Explosive Hyperinflation, Inflation-Tax Laffer Curve, and Modeling the Use of Money
Veröffentlicht auf Englisch.
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- 10.1628/0932456041438786
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This paper analyzes the existence of an inflation-tax Laffer curve (ITLC) in the context of two optimizing monetary models. Explosive hyperinflation rules out the presence of an ITLC. In a cash-in-advance economy, this paper shows that explosive hyperinflation is possible and thus an ITLC is ruled out whenever the relative risk aversion parameter is greater than one. In a money-in-the-utility-function model, it is shown that (i) an ITLC is also ruled out and (ii) explosive hyperinflations are more likely when the transactions role of money is more important.