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Inflation and Regulation of Government Debt: US Historical Evidence

Author

Listed:
  • Jonathan Payne

    (Department of Economics, Princeton University, Princeton, New Jersey, USA)

  • Bálint Szőke

    (Division of Monetary Affairs, Federal Reserve Board, Washington, DC, USA)

Abstract

Governments have often used two policy instruments to lower financing costs: the money supply to generate seigniorage and regulation of the financial system to increase demand for their interest-bearing bonds. Both involve trade-offs. This article marshals historical evidence and economic theories about how the US federal government has arranged monetary, financial, and fiscal systems since 1800 to lower its financing costs. In doing so, we infer evolving priorities of different US administrations.

Suggested Citation

  • Jonathan Payne & Bálint Szőke, 2025. "Inflation and Regulation of Government Debt: US Historical Evidence," Annual Review of Financial Economics, Annual Reviews, vol. 17(1), pages 151-172, November.
    • Handle: RePEc:anr:refeco:v:17:y:2025:p:151-172
    DOI: 10.1146/annurev-financial-112823-015810
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    Cited by:

    1. George J. Hall & Thomas J. Sargent, 2025. "Fiscal Consequences of the US War on COVID," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 66(5), pages 1753-1780, December.

    More about this item

    Keywords

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    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • N21 - Economic History - - Financial Markets and Institutions - - - U.S.; Canada: Pre-1913
    • N41 - Economic History - - Government, War, Law, International Relations, and Regulation - - - U.S.; Canada: Pre-1913

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