Fiscal Policy and the Price Level

Barbara Annicchiarico () and Giancarlo Marini

The B.E. Journal of Macroeconomics, 2005, vol. 5, issue 1, 15

Abstract: This paper studies the issue of price stability in a continuous time optimizing general equilibrium model with overlapping generations. It is shown that fiscal policy has effects on nominal variables. Fiscal expansions are inflationary even when the government intertemporal budget constraint is respected for any prices sequence and there is no recourse to money financing. Our results shed new light on the interaction between fiscal policy and nominal prices.

Keywords: Fiscal Policy; Price Stability (search for similar items in EconPapers)
Date: 2005
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DOI: 10.2202/1534-5998.1225

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