The Fallacy Of The Fiscal Theory Of The Price Level
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The Fallacy Of The Fiscal Theory Of The Price Level
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Author : Willem H. Buiter
language : en
Publisher:
Release Date : 1999
The Fallacy Of The Fiscal Theory Of The Price Level written by Willem H. Buiter and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1999 with Budget categories.
It is not common for an entire scholarly literature to be based on a fallacy, that is, 'on faulty reasoning; misleading or unsound argument'. The 'fiscal theory of the price level', recently re-developed by Woodford, Cochrane, Sims and others, is an example of a fatally flawed research programme. The source of the fallacy is an economic misspecification. The proponents of the fiscal theory of the price level do not accept the fundamental proposition that the government's intertemporal budget constraint is a constraint on the government's instruments that must be satisfied for all admissible values of the economy-wide endogenous variables. Instead they require it to be satisfied only in equilibrium. This economic misspecification has implications for the mathematical or logical properties of the equilibria supported by models purporting to demonstrate the properties of the fiscal approach. These include: overdetermined (internally inconsistent) equilibria; anomalies like the apparent ability to price things that do not exist; the need for arbitrary restrictions on the exogenous and predetermined variables in the government's budget constraint; and anomalous behaviour of the equilibrium' price sequences, including behaviour that will ultimately violate physical resource constraints. The issue is of more than academic interest. Policy conclusions could be drawn from the fiscal theory of the price level that would be harmful if they influenced the actual behaviour of the fiscal and monetary authorities. The fiscal theory of the price level implies that a government could exogenously fix its real spending, revenue and seigniorage plans, and that the general price level would adjust the real value of its contractual nominal debt obligations so as to ensure government solvency. When reality dawns, the result could be painful fiscal tightening, government default, or unplanned recourse to the inflation tax.
The Fallacy Of The Fiscal Theory Of The Price Level Again
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Author : Willem H. Buiter
language : en
Publisher:
Release Date : 2002
The Fallacy Of The Fiscal Theory Of The Price Level Again written by Willem H. Buiter and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2002 with categories.
This paper argues that the 'fiscal theory of the price level' (FTPL) is fallacious. The source of the fallacy is an elementary economic misspecification. The FTPL denies a fundamental property of any model of a market economy, that the budget constraint of any agent, private or public, must be satisfied identically, ie for all admissible values of the variables entering the budget constraint. Instead the FTPL requires the government's inter-temporal budget constraint to be satisfied only in equilibrium. The FTPL looks for equilibria in which the government can meet its contractual debt obligations exactly, despite having an overdetermined financial-fiscal monetary programme. The economic misspecification has implications for the mathematical properties of the equilibria supported by models that impose the structure of the FTPL. For example, the FTPL implies the anomaly that it can price money in an economy without money. The FTPL has an exact analogue in a 'household budget constraint theory of the price level', which is perhaps more readily recognised as a nonsense.
The Fallacy Of The Fiscal Theory Of The Price Level
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Author :
language : en
Publisher:
Release Date : 1999
The Fallacy Of The Fiscal Theory Of The Price Level written by and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1999 with categories.
The Fallacy Of The Fiscal Theory Of The Price Level One Last Time
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Author : Willem H. Buiter
language : en
Publisher:
Release Date : 2017
The Fallacy Of The Fiscal Theory Of The Price Level One Last Time written by Willem H. Buiter and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017 with categories.
The Fallacy Of The Fiscal Theory Of The Price Level
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Author : Willem Buiter
language : en
Publisher:
Release Date : 1999
The Fallacy Of The Fiscal Theory Of The Price Level written by Willem Buiter and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1999 with categories.
Fallacy Of The Fiscal Theory Of The Price Level Again
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Author :
language : en
Publisher:
Release Date : 2000
Fallacy Of The Fiscal Theory Of The Price Level Again written by and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2000 with categories.
The Fiscal Theory Of The Price Level
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Author :
language : es
Publisher:
Release Date : 2004
The Fiscal Theory Of The Price Level written by and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2004 with categories.
A Small Corner Of Intertemporal Public Finance New Developments In Monetary Economics
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Author : Willem H. Buiter
language : en
Publisher:
Release Date : 2004
A Small Corner Of Intertemporal Public Finance New Developments In Monetary Economics written by Willem H. Buiter and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2004 with Banks and banking, Central categories.
Cochrane S Defence Of The Fiscal Theory Of The Price Level
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Author : Colin Rogers
language : en
Publisher:
Release Date : 2006
Cochrane S Defence Of The Fiscal Theory Of The Price Level written by Colin Rogers and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006 with Prices categories.
Cochrane (2005) employs a well specified Walrasian general equilibrium model to defend the fiscal theory of the price level against two forms of criticism; that: (1) it implies the violation of Walras's Law and, (2) the completely cashless, frictionless version of the model cannot determine the price level. Of the two criticisms only the second is substantive. This paper explains why no version of Cochrane's model offers a theory of the price level. The model can determine the consumption good value of an asset and a numeraire denominated price level. A numeraire denominated price level is of no theoretical significance.
The Fiscal Theory Of The Price Level
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Author : John H. Cochrane
language : en
Publisher: Princeton University Press
Release Date : 2023-01-17
The Fiscal Theory Of The Price Level written by John H. Cochrane and has been published by Princeton University Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2023-01-17 with Business & Economics categories.
"Inflation, in which all prices and wages in an economy rise, is mysterious. If a war breaks out in the Middle East, and the price of oil goes up, the mechanism is no great mystery-supply and demand often work pretty visibly. But if you ask the grocer why the price of bread is higher, he or she will blame the wholesaler, who will blame the baker, who will blame the wheat supplier, and so on. Perhaps the ultimate cause is a government printing more money, but there is really no way to know this for certain but to sit down in an office with statistics, armed with some decent economic theory. But current economic theory doesn't really explain why we haven't seen inflation for so long, and more and more economists think that current theory doesn't hold together, or provide much guidance for how central banks should behave if inflation does break out. Many also worry that central banks have much less power over the economy than they think they do, and much less understanding of the mechanism behind what power they do have. The Fiscal Theory of the Price Level is a comprehensive new approach to monetary policy. Economist John Cochrane argues that money has value because the government accepts it for tax payments. This insight, he argues, leads to a deep re-reading of monetary policy and institutions. Inflation comes when a government is unable to repay its debts, rather than from mismanagement of the split of debt between money and bonds. In the book, he will analyze institutional design, historical episodes, and compare fiscal theory to the Keynesian and new-Keynesian theory based on interest rate targets, and to monetarism. The book offers an overview and introduction to the range of contemporary monetary economics and history of thought as well as the fiscal theory"--