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How fiscal policy affects the price level: lessons from a not so distant past

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  • Antipa, P.

Abstract

The last decade has witnessed large-scale debt accumulation in a number of developed countries. Such increases in debt levels raise questions about the sustainability of public finances and risks of debt monetisation. This letter analyses a historical case study of significant debt accumulation – Britain during the Napoleonic Wars. The author provides evidence on how expectations regarding the sustainability of public finances can affect the price level under extraordinary circumstances.

Suggested Citation

  • Antipa, P., 2015. "How fiscal policy affects the price level: lessons from a not so distant past," Rue de la Banque, Banque de France, issue 13, November..
  • Handle: RePEc:bfr:rueban:2015:13
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    File URL: https://publications.banque-france.fr/sites/default/files/medias/documents/rue-de-la-banque_13_2015-11_en.pdf
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    References listed on IDEAS

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    1. Jushan Bai & Pierre Perron, 1998. "Estimating and Testing Linear Models with Multiple Structural Changes," Econometrica, Econometric Society, vol. 66(1), pages 47-78, January.
    2. Creel, Jerome & Bihan, Herve Le, 2006. "Using structural balance data to test the fiscal theory of the price level: Some international evidence," Journal of Macroeconomics, Elsevier, vol. 28(2), pages 338-360, June.
    3. Stephen Broadberry & Bruce Campbell & Alexander Klein & Mark Overton & Bas van Leeuwen, 2012. "British Economic Growth, 1270-1870: an output-based approach," Studies in Economics 1203, School of Economics, University of Kent.
    4. Sims, Christopher A, 1994. "A Simple Model for Study of the Determination of the Price Level and the Interaction of Monetary and Fiscal Policy," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 4(3), pages 381-399.
    5. Bordo, Michael D. & White, Eugene N., 1991. "A Tale of Two Currencies: British and French Finance During the Napoleonic Wars," The Journal of Economic History, Cambridge University Press, vol. 51(2), pages 303-316, June.
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