Indeterminacy, bubbles, and the fiscal theory of price level determination
نویسندگان
چکیده
منابع مشابه
The Fiscal Theory of the Price Level
Charles T. Carlstrom is an economist at the Federal Reserve Bank of Cleveland, and Timothy S. Fuerst is an associate professor of economics at Bowling Green State University and a visiting scholar at the Bank. The authors would like to thank Larry Christiano and Terry Fitzgerald for helpful comments.
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The fiscal theory of the price level (FTPL) describes fiscal and monetary policy rules such that the price level is determined by government debt and fiscal policy alone, with monetary policy playing at best an indirect role. This theory clashes with the monetarist view that states that money supply is the primary determinant of the price level and inflation. Furthermore, many authors have argu...
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The fiscal theory of price determination asserts that the price level is determined by the ratio of nominal public debt to the present value of real primary surpluses. To show its fragility, we describe a cash-in-advance economy with infinitely lived real productive assets. The fiscal theory does not hold since speculative bubbles partly restore the classical indeterminacy result.
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Many traditional macroeconomic models do not have determinate predictions for the path of inflation: even for a given specification of money supplies, many paths of inflation are consistent with equilibrium. According to the fiscal theory of the price level, fiscal policy can be used to select which of these many paths actually occur. This article explains the fiscal theory of the price level a...
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ژورنال
عنوان ژورنال: Journal of Monetary Economics
سال: 2001
ISSN: 0304-3932
DOI: 10.1016/s0304-3932(00)00048-9