#2007-037B "The Optimal Inflation Target in an Economy with Limited Enforcement"
by Gaetano Antinolfi, Costas Azariadis, and James B. Bullard
September 2007
Revised November 2007

We formulate the central bank’s problem of selecting an optimal long-run inflation rate as the choice of a distorting tax by a planner who wishes to maximize discounted stationary utility for a heterogeneous population of infinitely-lived households in an economy with constant aggregate income. More...