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Disturbing the fiscal theory of the price level: Can it fit the eu-15?

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  • António Afonso

    ()
    (Universidade Técnica de Lisboa)

Abstract

With the fiscal theory of the price level (FTPL), Leeper-Sims-Woodford (LSW) argued that the government budget constraint plays a key role in determining the price level. Indeed, there could even be a dispute vis-à-vis the role of monetary policy in the formation of the price level. Apart from several theoretical criticisms, also addressed in the discussion given in this paper, the attempts to validate empirically the novel theory are, so far, rather sparse. Therefore, one of the purposes of this paper is to tentatively assess the possible empirical evidence, concerning the FTPL, for the EU-15 countries.

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Paper provided by International Conferences on Panel Data in its series 10th International Conference on Panel Data, Berlin, July 5-6, 2002 with number B4-3.

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Date of creation: Mar 2002
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Handle: RePEc:cpd:pd2002:b4-3

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Keywords: Fiscal theory of the price level; fiscal policy; EU-15; panel data models;

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Cited by:
  1. Andreas Thams, 2006. "Fiscal Policy Effects in the European Union," SFB 649 Discussion Papers SFB649DP2006-016, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  2. Rother, Philipp, 2004. "Fiscal policy and inflation volatility," Working Paper Series 0317, European Central Bank.
  3. Fan, Jingwen & Minford, Patrick, 2009. "Can the Fiscal Theory of the price level explain UK inflation in the 1970s?," Cardiff Economics Working Papers E2009/26, Cardiff University, Cardiff Business School, Economics Section, revised Mar 2011.
  4. Kilian Bizer & Zulia Gubaydullina & Hazim Rahahleh & Werner Sesselmeier, 2007. "FTPL-Perspective on Tradable Deficit Permits in the EMU," Atlantic Economic Journal, International Atlantic Economic Society, vol. 35(3), pages 259-267, September.
  5. Edda Zoli, 2005. "How does fiscal policy affect monetary policy in emerging market countries?," BIS Working Papers 174, Bank for International Settlements.

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