TY  - JOUR
AU  - Leeper,Eric M.
TI  - Fiscal Policy and Inflation: Pondering the Imponderables
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 9506
PY  - 2003
Y2  - February 2003
UR  - http://www.nber.org/papers/w9506
L1  - http://www.nber.org/papers/w9506.pdf
N1  - Author contact info:
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  - An asset-pricing perspective on inflation reveals that it depends on current and expected monetary and fiscal policies. There are three ways to carry $1 today into the future: money, bonds, and real assets. That dollar's purchasing power varies inversely with the price level. Expected money growth, tax rates, and government spending directly impinge on these expected rates of return of these assets, and determine the price level and the inflation rate. The paper considers a tax reduction that is financed by new government debt. It examines how alternative responses of current and future policies to the tax cut can imply very different outcomes for inflation.
ER  -