TY  - JOUR
AU  - Gordon,David B.
AU  - Leeper,Eric M.
TI  - The Price Level, the Quantity Theory of Money, and the Fiscal Theory of the Price Level
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 9084
PY  - 2002
Y2  - July 2002
UR  - http://www.nber.org/papers/w9084
L1  - http://www.nber.org/papers/w9084.pdf
N1  - Author contact info:
David B. Gordon
222 Sirrine Hall
Clemson University
Clemson SC 29634
E-Mail: gd@clemson.edu

Eric M. Leeper
Department of Economics
304 Wylie Hall
Indiana University
Bloomington, IN  47405
Tel: 812/855-9157
Fax: NA
E-Mail: eleeper@indiana.edu
AB  - We consider price level determination from the perspective of portfolio choice.  Arbitrages among money balances, bonds, and investment goods determine their relative demands.  Returns to real balance holdings (transactions services), the nominal interest rate, and after-tax returns to investment goods determine the relative values of nominal and real assets.  Since expectations of government policies ultimately determine the expected returns to both nominal and real assets, monetary and fiscal policies jointly determine the price level.  Special cases of the fiscal and monetary policies considered produce the quantity theory of money and the fiscal theory of the price level.
ER  -