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Disturbing the Fiscal Theory of the Price Level: Can it Fit the EU-15

  • António Afonso

With the fiscal theory of the price level (FTPL), Leeper- Sims-Woodford (LSW) argued that the government budget constraint plays a key role in determining the price level. Indeed, there could even be a dispute vis-à-vis the role of monetary policy in the formation of the price level. Apart from several theoretical criticisms, also addressed in the discussion given in this paper, the attempts to validate empirically the novel theory are, so far, rather sparse. Additionally, one of the purposes of this paper is to tentatively assess the possible empirical evidence, concerning the FTPL, for the EU-15 countries.

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Paper provided by ISEG - School of Economics and Management, Department of Economics, University of Lisbon in its series Working Papers Department of Economics with number 2002/01.

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Date of creation: 2002
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Handle: RePEc:ise:isegwp:wp12002
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Department of Economics, ISEG - School of Economics and Management, University of Lisbon, Rua do Quelhas 6, 1200-781 LISBON, PORTUGAL

Web page: https://aquila1.iseg.ulisboa.pt/aquila/departamentos/EC

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