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Reflections on the Fiscal Theory of the Price Level

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  • Philippe Weil

    (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po)

Abstract

In a world in which consumers correctly expect that both Ricardian and non-Ricardian policy regimes are possible in the future, the fiscal theory of the price level is valid, yet the price is indeterminate. This result does not rely on imposing that the initial stock of nominal bonds be strictly positive, and it does not require a surprise ex post revaluation of nominal assets.

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  • Philippe Weil, 2002. "Reflections on the Fiscal Theory of the Price Level," Post-Print hal-01053541, HAL.
    • Handle: RePEc:hal:journl:hal-01053541
    Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-01053541
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    References listed on IDEAS

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    1. Dirk Niepelt, 2004. "The Fiscal Myth of the Price Level," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(1), pages 277-300.
    2. Lawrence J. Christiano & Terry J. Fitzgerald, 2000. "Understanding the fiscal theory of the price level," Economic Review, Federal Reserve Bank of Cleveland, issue Q II, pages 2-38.
    3. Narayana R. Kocherlakota & Christopher Phelan, 1999. "Explaining the fiscal theory of the price level," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 23(Fall), pages 14-23.
    4. Buiter, Willem H., 1999. "The Fallacy of the Fiscal Theory of the Price Level," CEPR Discussion Papers 2205, C.E.P.R. Discussion Papers.
    5. Cushing, Matthew J., 1999. "The indeterminacy of prices under interest rate pegging: The non-Ricardian case," Journal of Monetary Economics, Elsevier, vol. 44(1), pages 131-148, August.
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    Cited by:

    1. Bennett T. Mccallum, 2003. "Is The Fiscal Theory of the Price Level Learnable?," Scottish Journal of Political Economy, Scottish Economic Society, vol. 50(5), pages 634-649, November.
    2. Jean‐Pascal Bénassy, 2009. "Interest rate rules and global determinacy: An alternative to the Taylor principle," International Journal of Economic Theory, The International Society for Economic Theory, vol. 5(4), pages 359-374, December.
    3. Hess Chung & Troy Davig & Eric M. Leeper, 2007. "Monetary and Fiscal Policy Switching," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(4), pages 809-842, June.
    4. Óscar J. Arce, 2005. "Reflections on fiscalist divergent price-paths," Working Papers 0533, Banco de España.

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