Understanding Policy in the Great Recession: Some Unpleasant Fiscal Arithmetic
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.
A data appendix is available at http://www.nber.org/data-appendix/w16087
Document Object Identifier (DOI): 10.3386/w16087
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. citation courtesy of
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