A remark on the fiscal theory of price determination |
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Authors: | Gaetano Bloise |
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Affiliation: | DEIR, University of Sassari, 34 Via Torre Tonda, 07100 Sassari, Italy |
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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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Keywords: | Money Bubbles Indeterminacy Monetary policy Fiscal policy |
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