Understanding Policy in the Great Recession: Some Unpleasant Fiscal Arithmetic

John H. Cochrane

NBER Working Paper No. 16087
Issued in June 2010
NBER Program(s):   AP   EFG

I use the valuation equation of government debt to understand fiscal and monetary policy in and following the great recession of 2008-2009, to think about fiscal pressures on US inflation, and what sequence of events might surround such an inflation. I emphasize that a fiscal inflation can come well before large deficits or monetization are realized, and is likely to come with stagnation rather than a boom.

Published: Cochrane, John H., 2011. "Understanding policy in the great recession: Some unpleasant fiscal arithmetic," European Economic Review, Elsevier, vol. 55(1), pages 2-30, January.

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An online appendix is available for this publication.

Acknowledgments

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