Working Paper: NBER ID: w16087
Authors: John H. Cochrane
Abstract: I use the valuation equation of government debt to understand fiscal and monetary policy in and following the great recession of 2008-2009, to think about fiscal pressures on US inflation, and what sequence of events might surround such an inflation. I emphasize that a fiscal inflation can come well before large deficits or monetization are realized, and is likely to come with stagnation rather than a boom.
Keywords: Great Recession; Fiscal Policy; Monetary Policy; Inflation; Government Debt
JEL Codes: E3; E31; E4; E5; E52; E6
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| government debt (H63) | inflation (E31) |
| fiscal stimulus (E62) | aggregate demand (E00) |
| financial crisis (G01) | recession (E32) |
| recession (E32) | changes in aggregate demand (E00) |
| quantitative easing + fiscal cooperation (E63) | inflation (E31) |
| fiscal expectations (H68) | inflation (E31) |
| fiscal inflation (E62) | stagnation (D50) |