Sproul, Michael (2011): The fiscal theory of the price level and the backing theory of money.
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Abstract
A numerical example of privately issued money is used to illustrate the fiscal theory of the price level, and to show that the fiscal theory is best understood as a subset of the backing theory of money. Government issuance of money or debt is shown to be potentially inflationary only when the government’s net worth is negative, and when the government’s assets do not rise in step with its liabilities. The backing theory is used to examine whether inflation can be avoided by a sufficiently tough central bank, and to criticize the view that fiscal policies affect inflation through their wealth effects.
Item Type: | MPRA Paper |
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Original Title: | The fiscal theory of the price level and the backing theory of money |
Language: | English |
Keywords: | Money, price level, fiscal, real bills, backing theory |
Subjects: | E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E50 - General |
Item ID: | 32502 |
Depositing User: | Michael Sproul |
Date Deposited: | 30 Jul 2011 18:51 |
Last Modified: | 03 Oct 2019 12:34 |
References: | Bassetto, Marco. 2008. “Fiscal Theory of the Price Level,” In Lawrence Blume and Steven Durlauf (eds.), The New Palgrave: A Dictionary of Economics, 2nd edition, 2008, Macmillan: London. Cochrane, J. H. (2001). “Money as Stock”. http://www-gsb.uchicago.edu/fac/john.cochrane/research/Papers/ Cochrane, J. H. (2009). “Fiscal Theory, and Fiscal and Monetary Policy in the Financial Crisis”. http://www-gsb.uchicago.edu/fac/john.cochrane/research/Papers/ Kocherlakota, Narayana. “Central Bank Independence and Sovereign Default”, Wharton Conference, Philadelphia, Pennsylvania, April 1, 2011. Sims, Christopher A. (2011) “Stepping on a Rake: The Role of Fiscal Policy in the Inflation of the 1970’s”. European Economic review, 55 (2011) 48-56. Sproul, Michael F. “There’s No Such Thing as Fiat Money”, UCLA Working Paper #830, 2003. Woodford, Michael, “Price Level Determinacy Without Control of a Monetary Aggregate,” Carnegie-Rochester Conference Series on Public Policy, 43:1-46 (1995). |
URI: | https://mpra.ub.uni-muenchen.de/id/eprint/32502 |