NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Perceptions and Misperceptions of Fiscal Inflation

Eric M. Leeper, Todd B. Walker

Chapter in NBER book Fiscal Policy after the Financial Crisis (2013), Alberto Alesina and Francesco Giavazzi, editors (p. 255 - 299)
Conference held December 12-13, 2011
Published in June 2013 by University of Chicago Press
© 2013 by the National Bureau of Economic Research

This chapter examines alternative policy scenarios involving price-level changes induced by the fiscal theory. It is organized as follows. Section 7.2 uses a simple model to illustrate how the price level is determined in the conventional paradigm and in the fiscal theory. The conventional policy mix (Regime M) has monetary policy target inflation and fiscal policy stabilizes the value of debt. An alternative mix (Regime F) is available when governments issue nominal bonds. The chapter then describes how the maturity structure of nominal government bonds can alter the time series properties of inflation and lays out the precise role that monetary policy plays in a fiscal equilibrium. Having established that under Regime F policies monetary policy does not control inflation, Section 7.3 turns to plausible scenarios in which the central bank does not control inflation even in Regime M. Section 7.4 considers the empirical implications of monetary–fiscal policy interactions.

This chapter is no longer available for free download, since the book has been published. To obtain a copy, you must buy the book.
Order from Amazon.com

Machine-readable bibliographic record - MARC, RIS, BibTeX

This chapter first appeared as NBER working paper w17903, Perceptions and Misperceptions of Fiscal Inflation, Eric M. Leeper, Todd B. Walker
Commentary on this chapter: Comment, Jordi Galí
Users who downloaded this chapter also downloaded these:
Auerbach and Gorodnichenko Fiscal Multipliers in Recession and Expansion
Evans, Kotlikoff, and Phillips Game Over: Simulating Unsustainable Fiscal Policy
Perotti The "Austerity Myth": Gain without Pain?
Gali Comment on "Perceptions and Misperceptions of Fiscal Inflation"
Trabandt and Uhlig How Do Laffer Curves Differ across Countries?
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us