Is the Fiscal Theory of the Price Level Learnable?

Bennett McCallum ()

No 9961, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: 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.

JEL-codes: E5 E6 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac and nep-mon
Date: Written
Note: EFG ME
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Related works:
Working Paper: Is The Fiscal Theory of the Price Level Learnable?
Journal Article: Is The Fiscal Theory of the Price Level Learnable? (2003)
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