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Fiscal Limits and Monetary Policy / Eric M. Leeper.
- Format:
- Book
- Author/Creator:
- Leeper, Eric M.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w18877.
- NBER working paper series no. w18877
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2013.
- Summary:
- Every economy faces a "fiscal limit" that delivers the maximum government debt-GDP ratio that can be sustained without appreciable risk of default or higher inflation. But governments in advanced economies issue substantial nominal debt and nominal debt is a commitment to repay in nominal units. When such economies are approaching their fiscal limits, debt can be devalued through higher current and future inflation rates. The paper develops a simple bond market supply-demand apparatus to explain how fiscal policy can be a source of inflation, while monetary policy merely determines the timing of inflation.
- Notes:
- Print version record
- March 2013.
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