The Fiscal Theory of the Price Level with a Bubble

Markus Brunnermeier, Sebastian Merkel and Yuliy Sannikov

No 14680, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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: Monetary economics; Fiscal policy (search for similar items in EconPapers)
JEL-codes: E44 E52 E63 (search for similar items in EconPapers)
Date: 2020-04
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Citations: View citations in EconPapers (25)

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Related works:
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)
Working Paper: The Fiscal Theory of the Price Level with a Bubble (2020)
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