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Discretionary Policy Interactions and the Fiscal Theory of the Price Level: A SVAR Analysis on French Data

Jerome Creel (), Paola Monperrus-Veroni and Francesco Saraceno ()

No 2005-12, Documents de Travail de l'OFCE from Observatoire Francais des Conjonctures Economiques (OFCE)

Abstract: We estimate a SVAR model of the French economy. The econometric method originates in Blanchard and Perotti [Quarterly Journal of Economics, 2002] but owes also extensively to the fiscal theory of the price level (FTPL) that investigates the interactions between government surplus, debt accumulation and price dynamics. We have the objective, on the one hand, of assessing the effects of fiscal and monetary policy shocks on the economy; and, on the other, of studying the strategic interactions between fiscal and monetary authorities. As a consequence, the theoretical restrictions to identify our model are derived from a FTPL framework. Our estimations reveal so-called Keynesian features of fiscal and monetary shocks; meanwhile, they are consistent with the prediction of the FTPL as regards price dynamics. Although the first part of our findings agrees with most of the recent literature on the subject, the non-rejection of the FTPL is an originality.

Keywords: Fiscal policy; Monetary policy; Fiscal theory of the price level; Structural VAR; France (search for similar items in EconPapers)
JEL-codes: C32 E60 E63 H60 (search for similar items in EconPapers)
Date: 2005
New Economics Papers: this item is included in nep-eec, nep-mac, nep-mon and nep-pbe
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Working Paper: Discretionary Policy Interactions and the Fiscal Theory of the Price Level: A SVAR Analysis on French Data (2005) Downloads
Working Paper: Discretionary Policy Interactions and the Fiscal Theory of the Price Level: A SVAR Analysis on French Data (2005) Downloads
Working Paper: Discretionary Policy Interactions and the Fiscal Theory of the Price Level: A SVAR Analysis on French Data (2005) Downloads
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