TY  - JOUR
AU  - McCallum,Bennett T.
TI  - Is the Fiscal Theory of the Price Level Learnable?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 9961
PY  - 2003
Y2  - September 2003
UR  - http://www.nber.org/papers/w9961
L1  - http://www.nber.org/papers/w9961.pdf
N1  - Author contact info:
Bennett T. McCallum
Tepper School of Business, Posner 256
Carnegie Mellon University
Pittsburgh, PA 15213
Tel: 412/268-2347
Fax: 412/268-6830
E-Mail: bm05@andrew.cmu.edu
AB  - This paper presents a prototype model for development of the fiscal theory of the price level.' In this simple setting, the fiscal theory's distinctiveness relies upon adoption of a bubble solution, rather than the rational-expectations fundamentals solution. The paper then shows that the fiscal solution is not adaptively learnable, by agents who estimate coefficients relevant for forecasting on the basis of available data, whereas the orthodox  monetarist' solution exists and is learnable. Finally, it is argued that similar results should be expected to apply in models that are more general in various dimensions.
ER  -