search query: @indexterm fiscal policy / total: 505
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Author: | Sims, S. |
Title: | A simple model for study of the determination of the price level and the interaction of monetary and fiscal policy |
Journal: | Economic Theory
1994 : VOL. 4:3, p. 381-399 |
Index terms: | PRICE LEVEL MONETARY POLICY FISCAL POLICY |
Language: | eng |
Abstract: | A representative-agent model with money holdings motivated by transaction costs, a fiscal authority that taxes and issues debt, no production, and a convenient functional form for agents' utility is presented. The model can be solved analytically, and illustrates the dependence of price determination on fiscal policy, the possibility of indeterminacy, even stochastic explosion , of the price level in the face of a monetary policy that holds M fixed, and the possibility of a unique, stable price level in the face of a monetary policy that simply pegs the nominal interest rates at an arbitrary level. |
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