Analyzing Fiscal Policy Matters More Than Ever: The Fiscal Theory of the Price Level and Inflation

Abstract: he fiscal theory of the price level is a theoretical framework for understanding how monetary and fiscal policies interact in the determination of macroeconomic outcomes. The key insight is that future fiscal conditions determine the current price level, whereby monetary and fiscal policy are connected by the government budget constraint.

Keywords: Fiscal theory of the price level; inflation; government budget constraint;

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Bibliographic Information

Provider: Federal Reserve Bank of Richmond

Part of Series: Richmond Fed Economic Brief

Publication Date: 2022-09

Volume: 22

Issue: 39