Policy Interaction, Learning and the Fiscal Theory of Prices

dc.contributor.authorEvans, George W., 1949-
dc.contributor.authorHonkapohja, Seppo, 1951-
dc.date.accessioned2003-08-15T21:15:41Z
dc.date.available2003-08-15T21:15:41Z
dc.date.issued2002-08-03
dc.description.abstractWe investigate both the rational explosive inflation paths studied by (McCallum 2001), and the classification of fiscal and monetary polices proposed by (Leeper 1991), for stability under learning of the rational expectations equilibria (REE). Our first result is that the fiscalist REE in the model of (McCallum 2001) is not locally stable under learning. In contrast, in the setting of (Leeper 1991), different possibilities can arise. We find, in particular, that there are parameter domains for which the fiscal theory solution, in which fiscal variables affect the price level, can be a stable outcome under learning. However, for other parameter domains the monetarist solution is instead the stable equilibrium.en
dc.format.extent417792 bytes
dc.format.mimetypeapplication/pdf
dc.identifier.urihttps://hdl.handle.net/1794/101
dc.language.isoen_US
dc.publisherUniversity of Oregon, Dept. of Economicsen
dc.relation.ispartofseriesUniversity of Oregon Economics Department Working Papers;2002-17
dc.subjectExplosive price pathsen
dc.subjectFiscal policyen
dc.subjectExpectationsen
dc.subjectInflation (Finance)en
dc.subjectMicroeconomicsen
dc.subjectMacroeconomicsen
dc.subjectMonetary policyen
dc.titlePolicy Interaction, Learning and the Fiscal Theory of Pricesen
dc.typeWorking Paperen

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