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| Author: | Buiter, W. H. |
| Title: | The fiscal theory of the price level: a critique |
| Journal: | Economic Journal
2002 : JUL, VOL. 112:481, p. 459-480 |
| Index terms: | Fiscal policy Economic policy Price theory |
| Language: | eng |
| Abstract: | The author argues that the fiscal theory of the price level (FTPL) has feet of clay. The source of the problem is a fundamental economic misspecification. The FTPL confuses two key building blocks of a model of a market economy: budget constraints, which must be satisfied identically, and market clearing or equilibrium conditions. This economic misspecification has far-reaching implications for the mathematical properties of the equilibria supported by models that impose the structure of the FTPL. |
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