Working Paper: NBER ID: w21867
Authors: Eric M. Leeper; Campbell Leith
Abstract: We develop the theory of price-level determination in a range of models using both ad hoc policy rules and jointly optimal monetary and fiscal policies and discuss empirical issues that arise when trying to identify monetary-fiscal regime. The article concludes with directions in which theoretical and empirical developments may go. The article is prepared for the Handbook of Macroeconomics, volume 2 (John B. Taylor and Harald Uhlig, editors, Elsevier Press).
Keywords: No keywords provided
JEL Codes: E31; E52; E58; E61; E62; E63
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| monetary and fiscal policies (E63) | inflation (E31) |
| monetary and fiscal policies (E63) | debt stabilization (H63) |
| fiscal policy (E62) | inflation dynamics (E31) |
| regime M (monetary dominance) (E42) | inflation (E31) |
| regime F (fiscal dominance) (E63) | inflation (E31) |
| higher nominal debt (H63) | higher inflation in regime F (E31) |
| increases in government spending (H59) | higher inflation in regime F (E31) |
| maturity structure of government debt (H63) | equilibrium dynamics (D50) |
| longer maturities (G19) | greater flexibility in managing inflation expectations (E31) |