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Fiscal policy in a monetarist model


  • Preston J. Miller


In a model which exhibits many monetarist properties it is shown that monetary and fiscal policies must be coordinated. The model is populated by overlapping generations of three-period lived agents who can hold fiat money, fiat bonds, and physical capital. A government produces a public good and issues both money and fiat bonds to finance permanent budget deficits. In this model both fiat money and fiat bonds can have value in equilibrium, and their co-existence can allow a more efficient financing of deficits than can a single debt instrument.

Suggested Citation

  • Preston J. Miller, 1982. "Fiscal policy in a monetarist model," Staff Report 67, Federal Reserve Bank of Minneapolis.
  • Handle: RePEc:fip:fedmsr:67

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    References listed on IDEAS

    1. John Bryant & Neil Wallace, 1980. "A suggestion for further simplifying the theory of money," Staff Report 62, Federal Reserve Bank of Minneapolis.
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    Cited by:

    1. Preston J. Miller, 1982. "A monetarist approach to federal budget control," Working Papers 210, Federal Reserve Bank of Minneapolis.
    2. Preston J. Miller & Richard M. Todd, 1992. "Real effects of monetary policy in a world economy," Staff Report 154, Federal Reserve Bank of Minneapolis.
    3. Miller, Preston J. & Todd, Richard M., 1995. "Real effects of monetary policy in a world economy," Journal of Economic Dynamics and Control, Elsevier, vol. 19(1-2), pages 125-153.

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