The Fiscal Theory of the Price Level and Initial Government Debt
It is widely believed that the Fiscal Theory of the Price Level (FTPL) does not work in an environment in which initial government debt is zero. This paper demonstrates that this view is incorrect when the government issues a set of financial assets restricted to standard nominal debt contracts and money. In particular, it is possible to define a stochastic non-Ricardian fiscal policy for which the set of equilibrium price sequences under non-Ricardian fiscal policy is a proper subset of the set of equilibrium price sequences under Ricardian fiscal policy. (Copyright: Elsevier)
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Volume (Year): 10 (2007)
Issue (Month): 2 (April)
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- Lawrence J. Christiano & Terry J. Fitzgerald, 2000.
"Understanding the fiscal theory of the price level,"
Federal Reserve Bank of Cleveland, issue Q II, pages 2-38.
- 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.
- Niepelt, Dirk, 2002.
"The Fiscal Myth of the Price Level,"
710, Stockholm University, Institute for International Economic Studies.
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"A Game-Theoretic View of the Fiscal Theory of the Price Level,"
Econometric Society, vol. 70(6), pages 2167-2195, November.
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- Marco Bassetto, 2000. "A Game-Theoretic View of the Fiscal Theory of the Price Level," Econometric Society World Congress 2000 Contributed Papers 1492, Econometric Society.
- Narayana Kocherlakota & Christopher Phelan, 1999. "Explaining the fiscal theory of the price level," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 14-23.
- Woodford, Michael, 1994. "Monetary Policy and Price Level Determinacy in a Cash-in-Advance Economy," Economic Theory, Springer, vol. 4(3), pages 345-80.
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