The Fiscal Theory of the Price Level / / John Cochrane.

• Superior document: Title is part of eBook package: De Gruyter Princeton University Press Complete eBook-Package 2023
• VerfasserIn: Cochrane, John,
• Place / Publishing House: Princeton, NJ : : Princeton University Press, , [2022]; ©2023
• Year of Publication: 2022
• Language: English
• Physical Description: 1 online resource (584 p.) :; 55 b/w illus. 6 tables.

A comprehensive account of how government deficits and debt drive inflationWhere do inflation and deflation ultimately come from? The fiscal theory of the price level offers a simple answer: Prices adjust so that the real value of government debt equals the present value of taxes less spending. Inflation breaks out when people don’t expect the government to fully repay its debts. The fiscal theory is well suited to today’s economy: Financial innovation undermines money demand, and central banks don’t control the money supply or aggressively change interest rates, invalidating classic theories, while large debts and deficits threaten inflation and constrain monetary policy. This book presents a comprehensive account of this important theory from one of its leading developers and advocates.John Cochrane aims to make fiscal theory useful as a conceptual framework and modeling tool, and for analyzing history and policy. He merges fiscal theory with standard models in which central banks set interest rates, giving a novel account of monetary policy. He generalizes the theory to explain data and make realistic predictions. For example, inflation decreases in recessions despite deficits because discount rates fall, raising the value of debt; specifying that governments promise to partially repay debt avoids classic puzzles and allows the theory to apply at all times, not just during periods of high inflation. Cochrane offers an extensive rethinking of monetary doctrines and institutions through the eyes of fiscal theory, and analyzes the era of zero interest rates and post-pandemic inflation.Filled with research by Cochrane and others, The Fiscal Theory of the Price Level offers important new insights about fiscal and monetary policy.

Table of Contents

Frontmatter -- Contents -- Preface -- Notation -- Part 1 The Fiscal Theory -- Introduction -- 1 A Two-PeriodModel -- 2 An IntertemporalModel -- 3 A Bit of Generality -- 4 Debt, Deficits, Discount Rates, and Inflation -- 5 Fiscal Theory in Sticky PriceModels -- 6 Fiscal Constraints -- 7 Long-Term Debt Dynamics -- Part II Assets, Rules, and Institutions -- 8 Assets and Choices -- 9 Better Rules -- 10 Balance Sheets and Pots of Assets -- Part III Monetary Doctrines, Institutions, and Some Histories -- 11 Monetary Policies -- 12 Interest Rate Targets -- 13 Monetary Institutions -- 14 Stories and Histories -- 15 Esthetics and Philosophy -- Part IV Money, Interest Rates, and Regimes -- 16 The New-Keynesian Model -- 17 Keynesian Models with Sticky Prices -- 18 History and Implications -- 19 Monetarism -- 20 The Zero Bound -- 21 The COVID-19 Inflation -- 22 Observational Equivalence -- Part V Past, Present, and Future -- 23 Past and Present -- 24 Tests,Models, and Applications -- 25 The Future -- Bibliography -- Index