Long-term debt and optimal policy in the fiscal theory of the price level. Journal of Political Economy 76, 53–67.Ĭochrane, J. A simple macroeconomic model with a government budget restraint. American Economic Review 57, 434–13.Ĭhrist, C. A short-run aggregate-demand model of the interdependence and effects of monetary and fiscal policies with Keynesian and classical interest elasticities. Capital Theory, Equilibrium Analysis, and Recursive Utility. Are government bonds net wealth? Journal of Political Economy 82, 1095–117.īecker, R. This process is experimental and the keywords may be updated as the learning algorithm improves.īarro, R. These keywords were added by machine and not by the authors. Taking the government budget constraint seriously can overturn some widely held beliefs about policy effects. This intertemporal dimension creates a rich set of possible impacts of routine macro policy actions, as current or future policies can be expected to adjust to satisfy the government budget, along with other equilibrium conditions. Whenever borrowing is the source of some fiscal financing, the government budget constraint also serves to link current monetary and fiscal choices to expected future monetary and fiscal policy variables. The government budget constraint is an accounting identity linking the monetary authority’s choices of money growth or nominal interest rate and the fiscal authority’s choices of spending, taxation, and borrowing at a point in time.
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