This paper discuss the merits of an independent "EuroFed" within the context of a tax/seigniorage smoothing model for a monetary union. There is an incentive to use a surprise inflation tax to wipe out the real value of government debt and wage contracts because this allows a cut in...

A democratic society in which the distribution of wealth is unequal elects political parties which tend to represent the interests of the poor. The clientele of such governments favour unanticipated inflation taxes to erode the real value of debt service and redistribute income from the rich to...