This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Policy interaction, learning and the fiscal theory of prices

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Evans , George W. (University of Oregon)
Honkapohja, Seppo (Bank of Finland, University of Helsinki)

Additional information is available for the following registered author(s):

Abstract

We 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 learning of rational expectations equilibria (REE). Our first result is that the fiscalist REE in the model of McCallum (2001) is not locally stable under learning. By contrast, in the setting of Leeper (1991), different possibilities can obtain. We find, in particular, that there are parameter domains for which the fiscal theory solution – in which fiscal variables affect the price level – can be a stable outcome under learning. For other parameter domains, the monetarist solution is the stable equilibrium.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.bof.fi/NR/rdonlyres/8F91362D-5677-4C78-BFF6-B23856490A8F/0/0218.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by Bank of Finland in its series Research Discussion Papers with number 18/2002.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 32 pages
Date of creation: 28 Aug 2002
Date of revision:
Handle: RePEc:hhs:bofrdp:2002_018

Contact details of provider:
Postal: Bank of Finland, P.O. Box 160, FI-00101 Helsinki, Finland
Web page: http://www.bof.fi/en/tutkimus
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: (Minna Valkama).

Related research
Keywords: inflation; expectations; fiscal and monetary policy; explosive price paths;

Other versions of this item:

Find related papers by JEL classification:
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

References listed on IDEAS
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. Buiter, Willem H, 1998. "The Young Person's Guide to Neutrality, Price Level Indeterminacy, Interest Rate Pegs and Fiscal Theories of the Price Level," CEPR Discussion Papers 1799, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  2. Leeper, Eric M., 1991. "Equilibria under 'active' and 'passive' monetary and fiscal policies," Journal of Monetary Economics, Elsevier, vol. 27(1), pages 129-147, February. [Downloadable!] (restricted)
  3. repec:cup:macdyn:v:2:y:1998:i:2:p:156-82 is not listed on IDEAS
  4. Carlstrom, Charles T. & Fuerst, Timothy S., 2001. "Timing and real indeterminacy in monetary models," Journal of Monetary Economics, Elsevier, vol. 47(2), pages 285-298, April. [Downloadable!] (restricted)
    Other versions:
  5. Evans, George W. & Ramey, Garey, 1998. "Calculation, Adaptation And Rational Expectations," Macroeconomic Dynamics, Cambridge University Press, vol. 2(02), pages 156-182, June. [Downloadable!]
    Other versions:
  6. C.A. Sims, 1999. "The Precarious Fiscal Foundations of EMU," DNB Staff Reports (discontinued) 34, Netherlands Central Bank. [Downloadable!]
  7. McCallum, Bennett T., 2001. "Indeterminacy, bubbles, and the fiscal theory of price level determination," Journal of Monetary Economics, Elsevier, vol. 47(1), pages 19-30, February. [Downloadable!] (restricted)
    Other versions:
  8. Howitt, Peter, 1992. "Interest Rate Control and Nonconvergence to Rational Expectations," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 776-800, August. [Downloadable!] (restricted)
  9. 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. [Downloadable!] (restricted)
Full references

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. Kauko, Karlo, 2002. "Links between securities settlement systems: An oligopoly theoretic approach," Research Discussion Papers 27/2002, Bank of Finland. [Downloadable!]
  2. Orlando Gomes, . "Volatility, Heterogeneous Agents and Chaos," The Electronic Journal of Evolutionary Modeling and Economic Dynamics, IFReDE - Université Montesquieu Bordeaux IV. [Downloadable!]
    Other versions:
  3. Railavo, Jukka, 2003. "Effects of the supply-side channel on stabilisation properties of policy rules," Research Discussion Papers 34/2003, Bank of Finland. [Downloadable!]
  4. 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:
  5. Óscar J. Arce, 2005. "Reflections on fiscalist divergent price-paths," Banco de España Working Papers 0533, Banco de España. [Downloadable!]
  6. George W. Evans & Seppo Honkapohja, 2004. "Adaptive learning and monetary policy design," Macroeconomics 0405008, EconWPA. [Downloadable!]
    Other versions:
  7. George W. Evans & Seppo Honkapohja, 2004. "Friedman’s money supply rule vs optimal interest rate policy," Macroeconomics 0405002, EconWPA. [Downloadable!]
    Other versions:
  8. Granlund , Peik, 2002. "Bank exit legislation in US, EU and Japanese financial centres," Research Discussion Papers 25/2002, Bank of Finland. [Downloadable!]
  9. repec:bep:maccon:v:6:y:2006:i:1:p:1437-1437 is not listed on IDEAS
    Other versions:
  10. Peik Granlund, 2004. "Bank exit legislation in US, EU and Japanese financial centres," Finance 0405015, EconWPA. [Downloadable!]
  11. George W. Evans & Seppo Honkapohja, 2003. "Friedman's Money Supply Rule versus Optimal Interest Rate Policy," University of Oregon Economics Department Working Papers 2003-30, University of Oregon Economics Department, revised 01 Oct 2003. [Downloadable!]
    Other versions:
  12. Jukka Railavo, 2004. "Stability consequences of fiscal policy rules," Macroeconomics 0404020, EconWPA. [Downloadable!]
  13. Evans, George W & Honkapohja, Seppo, 2008. "Expectations, Learning and Monetary Policy: An Overview of Recent Rersearch," CEPR Discussion Papers 6640, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  14. Jukka Railavo, 2004. "Effects of the supply-side channel on stabilisation properties of policy rules," Macroeconomics 0404028, EconWPA. [Downloadable!]
  15. Railavo , Jukka, 2004. "Stability consequences of fiscal policy rules," Research Discussion Papers 1/2004, Bank of Finland. [Downloadable!]
  16. Karlo Kauko, 2004. "Links between securities settlement systems: An oligopoly theoretic approach," Industrial Organization 0405003, EconWPA. [Downloadable!]
Statistics
Access and download statistics

Did you know? You too can volunteer for RePEc, for example by encouraging others to register as authors.

This page was last updated on 2009-11-12.


This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.