The Fiscal Theory of the Price Level with a Bubble

Markus Brunnermeier, Sebastian Merkel and Yuliy Sannikov
Additional contact information
Sebastian Merkel: Princeton University
Yuliy Sannikov: Stanford University

Working Papers from Princeton University. Economics Department.

Abstract: This paper incorporates a bubble term in the standard FTPL equation to explain why countries with persistently negative primary surpluses can have a positively valued currency and low inflation. It also provides an example with closed-form solutions in which idiosyncratic risk on capital returns depresses the interest rate on government bonds below the economy’s growth rate.

Keywords: Fiscal policy; Monetary Economics (search for similar items in EconPapers)
JEL-codes: E44 E52 E63 (search for similar items in EconPapers)
Date: 2020-05
New Economics Papers: this item is included in nep-cwa, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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https://scholar.princeton.edu/sites/default/files/ ... tpl_bubble_paper.pdf

Related works:
Working Paper: The Fiscal Theory of the Price Level with a Bubble (2020)
Working Paper: The Fiscal Theory of the Price Level with a Bubble (2020)
Working Paper: The Fiscal Theory of Price Level with a Bubble (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:pri:econom:2020-47

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