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The fiscal theory of the price level

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Author Info
Charles T. Carlstrom
Timothy S. Fuerst

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Abstract

A traditional function of the central bank is to control the price level. The fiscal theory of the price level challenges this assumption, arguing instead that the fiscal authority's budgetary policy is the primary determinant of the price level. The authors provide a critical review of the fiscal theory and its implications for monetary policy.

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File URL: http://www.clevelandfed.org/Research/review/2000/fiscal.pdf
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Publisher Info
Article provided by Federal Reserve Bank of Cleveland in its journal Economic Review.

Volume (Year): (2000)
Issue (Month): Q I ()
Pages: 22-32
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:fip:fedcer:y:2000:i:qi:p:22-32

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Related research
Keywords: Banks and banking; Central ; Fiscal policy ; Monetary policy;

Cited by:
(explanations, 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.)

  1. Leopold von Thadden, 2004. "Active monetary policy, passive fiscal policy and the value of pure debt: some further monetarist arithmetic," Money Macro and Finance (MMF) Research Group Conference 2003 108, Money Macro and Finance Research Group. [Downloadable!]
  2. Bennett T. McCallum & Edward Nelson, 2006. "Monetary and fiscal theories of the price level: the irreconcilable differences," Working Papers 2006-010, Federal Reserve Bank of St. Louis. [Downloadable!]
    Other versions:
  3. Joydeep Bhattacharya & Joseph H. Haslag, 1999. "Monetary policy arithmetic: some recent contributions," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Q III, pages 26-36. [Downloadable!]
    Other versions:
  4. Tödter, Karl-Heinz, 2002. "Monetary indicators and policy rules in the P-star model," Discussion Paper Series 1: Economic Studies 2002,18, Deutsche Bundesbank, Research Centre. [Downloadable!]
  5. Lawrence J. Christiano & Terry J. Fitzgerald, 2000. "Understanding the Fiscal Theory of the Price Level," NBER Working Papers 7668, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  6. Michael Woodford, 2001. "Fiscal Requirements for Price Stability," NBER Working Papers 8072, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  7. Järvinen, Marketta, 2002. "Exchange rate regimes and nominal convergence in the CEECs," BOFIT Discussion Papers 4/2002, Bank of Finland, Institute for Economies in Transition. [Downloadable!]
  8. António Afonso, 2002. "Disturbing the Fiscal Theory of the Price Level: Can it Fit the EU-15," Working Papers 2002/01, Department of Economics at the School of Economics and Management (ISEG), Technical University of Lisbon.. [Downloadable!]
    Other versions:
  9. Taiji Harashima, 2004. "The Ultimate Source of Inflation: A Microfoundation of the Fiscal Theory of the Price Level," Macroeconomics 0409018, EconWPA, revised 23 Sep 2004. [Downloadable!]
  10. David B. Gordon & Eric M. Leeper, 2002. "The Price Level, the Quantity Theory of Money, and the Fiscal Theory of the Price Level," NBER Working Papers 9084, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  11. Khan, Safdar Ullah & Saqib, Omar Farooq, 2008. "Political Instability and Inflation in Pakistan," MPRA Paper 13056, University Library of Munich, Germany, revised 02 Jan 2009. [Downloadable!]
  12. Harashima, Taiji, 2008. "A Microfounded Mechanism of Observed Substantial Inflation Persistence," MPRA Paper 10668, University Library of Munich, Germany. [Downloadable!]
  13. Harashima, Taiji, 2007. "The Optimal Quantity of Money Consistent with Positive Nominal Interest Rates," MPRA Paper 1839, University Library of Munich, Germany, revised 19 Feb 2007. [Downloadable!]
  14. Bennett T. McCallum, 2003. "Is the Fiscal Theory of the Price Level Learnable?," NBER Working Papers 9961, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
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