Policy Interaction, Learning, And The Fiscal Theory Of Prices
AbstractWe investigate both the rational explosive inflation paths studied by McCallum (2001), and the classification of fiscal and monetary policies proposed by Leeper (1991), for stability under least squares (LS) learning of the rational expectations equilibria (REE). Our first result is that the explosive fiscalist REE is not locally stable under LS learning. In contrast, in Leeper s setting, there are policy regimes for which the fiscalist solution, in which fiscal variables affect the price level, can be a locally stable outcome under LS learning. However, for other policy regimes the monetarist solution is, instead, the locally stable REE.
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Bibliographic InfoArticle provided by Cambridge University Press in its journal Macroeconomic Dynamics.
Volume (Year): 11 (2007)
Issue (Month): 05 (November)
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Other versions of this item:
- Evans , George W. & Honkapohja, Seppo, 2002. "Policy interaction, learning and the fiscal theory of prices," Research Discussion Papers 18/2002, Bank of Finland.
- Evans, G W & Honkapohja, Seppo, 2002. "Policy Interaction, Learning and the Fiscal Theory of Prices," CEPR Discussion Papers 3564, C.E.P.R. Discussion Papers.
- George W. Evans & Seppo Honkapohja, 2002. "Policy Interaction, Learning and the Fiscal Theory of Prices," University of Oregon Economics Department Working Papers 2002-17, University of Oregon Economics Department, revised 07 Jun 2007.
- D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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- Evans, George W. & Honkapohja, Seppo, 1999. "Learning dynamics," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 7, pages 449-542 Elsevier.
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- Kreps,David M. & Wallis,Kenneth F. (ed.), 1997. "Advances in Economics and Econometrics: Theory and Applications," Cambridge Books, Cambridge University Press, number 9780521589833, November.
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