Modeling the influence of fiscal policy on inflation

Christopher Sims ()

No 235, 2010 Meeting Papers from Society for Economic Dynamics

Abstract: It is well known that at some times and places fiscal considerations have had an impact on inflation. There is circumstantial evidence that they may have played a role in the inflation of the 1970's in the US. Currently concerns about deficits in the US seem to be influencing inflation expectations. Existing standard policy models rule out any connection of beliefs about future fiscal policy to current inflation. This paper discusses ways to allow for such effects in models usable for policy analysis.

Date: 2010
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