The fiscal theory of the price level puzzle: A non Ricardian view

Jean-Pascal Benassy ()

PSE Working Papers from PSE (Ecole normale supérieure)

Abstract: The fiscal theory of the price level says that the price level can be made determinate if the government uses fiscal policies such that government liabilities explode unless the price in the first period is at the "right" level. The policy implications are disturbing, as they call for rather adventurous fiscal policies. We show that these disturbing policy implications are specific to the "Ricardian" models that have been used to develop the theory. By moving to "non Ricardian" models we see that price determinacy is consistent with reasonable fiscal policies.

New Economics Papers: this item is included in nep-dge, nep-mac and nep-pbe
Date: 2005
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Persistent link: http://EconPapers.repec.org/RePEc:pse:psecon:2005-48

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