A remark on the fiscal theory of price determination |
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| Affiliation: | 1. Kyiv School of Economics, 92-94 Dmytrivska, Kyiv 01135, Ukraine;2. Department of Economics, Tippie College of Business, University of Iowa, Iowa City, IA 52242-1994, United States;1. Maastricht University, Maastricht, The Netherlands;2. Indian Statistical Institute, New Delhi, India;1. Global Market Solutions R&D center, 7 Cité de l’Ameublement, 75011 Paris, France;2. Université Paris-Saclay/CentraleSupélec, Laboratoire Genie Industriel, France;1. Center for Mathematical Economics, Universität Bielefeld Postfach 10 01 31 D-33501 Bielefeld, Germany;2. University of Johannesburg, South Africa;3. Paris School of Economics, CNRS, France;4. Paris School of Economics, University of Paris 1 Panthéon-Sorbonne, France |
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| Abstract: | The fiscal theory of price determination asserts that the price level is determined by the ratio of nominal public debt to the present value of real primary surpluses. To show its fragility, we describe a simple monetary economy with an infinitely lived real productive asset. Under the hypotheses of the fiscal theory, speculative bubbles occur at equilibrium, thus leading to an indeterminate price level. |
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