Fiscal Policy and Inflation: Pondering the Imponderables / Eric M. Leeper.

Format:

Book

Author/Creator:

Leeper, Eric M.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w9506.

NBER working paper series no. w9506

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Fiscal Policy and Inflation

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2003.

Summary:

An asset-pricing perspective on inflation reveals that it depends on current and expected monetary and fiscal policies. There are three ways to carry $1 today into the future: money, bonds, and real assets. That dollar's purchasing power varies inversely with the price level. Expected money growth, tax rates, and government spending directly impinge on these expected rates of return of these assets, and determine the price level and the inflation rate. The paper considers a tax reduction that is financed by new government debt. It examines how alternative responses of current and future policies to the tax cut can imply very different outcomes for inflation.

Notes:

Print version record

February 2003.