E63

John H. Cochrane

Cochrane asks whether U.S. postwar inflation can be understood using a "frictionless" fiscal theory of the price level -- in which the price level is pinned down by the government's intertemporal …

Marco Bassetto · David S Miller

Why do sudden inflations and currency crises occur, while symmetric sudden deflations never do? The paper asks whether treating nominal government bonds as analogous to ordinary corporate bonds — with …

Jess Benhabib · Stephanie Schmitt-Grohé · Martín Uribe

Because a Taylor-type interest-rate rule must be consistent with the zero nominal-interest-rate bound, it always admits a second, unintended steady state with low or negative inflation alongside the …

George-Marios Angeletos · Chen Lian · Christian K. Wolf

The paper asks whether a government can run a deficit today — issuing "stimulus checks" — and allow debt to return to its initial level without any future tax hike or spending cut. In environments …

Marvin Goodfriend

Classifying Federal Reserve crisis-era interventions into monetary policy, credit policy, and interest-on-reserves policy, Goodfriend argues that only "Treasuries only" monetary policy is fiscally …

Christopher A. Sims

Sims argues that fiat government debt is best understood as analogous to privately issued equity rather than to privately issued debt, since it promises only future paper rather than a commodity the …

Stefania Albanesi · V. V. Chari · Lawrence J. Christiano

Embedding the Kydland-Prescott/Barro-Gordon time-inconsistency logic into a standard sticky-price, cash-credit-goods general equilibrium model, this paper shows the model generically has either two …

Adrien Auclert · Matthew Rognlie · Ludwig Straub

Auclert, Rognlie, and Straub review a decade of Heterogeneous-Agent New Keynesian (HANK) research through a single canonical model, showing that monetary and balanced-budget fiscal policy have …

Christopher A. Sims

Applying the fiscal theory of the price level's corporate-finance analogy -- fiat (own-currency) government debt behaves like equity, while dollar-denominated or indexed debt behaves like conventional …

Hanno Lustig · Christopher Sleet · Şevin Yeltekin

Solving a Ramsey model of optimal fiscal and monetary policy in which the government can finance itself only with non-contingent nominal bonds of various maturities, this paper finds that optimal …

Michael Woodford

Woodford argues that commitment to a sound monetary policy rule, such as a Taylor rule, cannot by itself guarantee price stability, because Ricardian equivalence fails to make fiscal policy irrelevant …

Thomas J. Sargent · Joseph Zeira

Israeli inflation jumped from 130% to 400% in October 1983 with no contemporaneous rise in the government deficit; Sargent and Zeira attribute the jump to the government's announced bailout of …

John H. Cochrane

Extending the fiscal theory of the price level to long-term government debt, Cochrane shows that the maturity structure of outstanding debt determines whether news about future deficits shows up as …

Leonall C. Andersen · Jerry L. Jordan

This 1968 Federal Reserve Bank of St. Louis Review article by Leonall Andersen and Jerry Jordan — later known as the "St.

Sebastian Schmidt

The paper builds a discrete-time DSGE model with Calvo sticky prices in which the public sector has two feedback rules that can hit corners, generating endogenous shifts between an "orthodox" regime …

Camelia Minoiu · Rebecca Zarutskie · Andrei Zlate

Minoiu, Zarutskie, and Zlate ask whether participation in the Main Street Lending Program (MSLP)—a Federal Reserve emergency facility launched in mid-2020 to channel credit to small and mid-sized …

Árpád Ábrahám · Eva Carceles-Poveda · Yan Liu · Ramon Marimon

This paper asks how to optimally design a Financial Stability Fund (Fund) for a union of sovereign countries that must simultaneously (i) prevent sovereign default, (ii) provide risk-sharing and …

Stephanie Schmitt-Grohé · Martín Uribe

Studying optimal Ramsey fiscal and monetary policy in a sticky-price production economy where the government can tax only distortingly and can issue only nominal, non-state-contingent bonds, …

Ojasvita Bahl · Chetan Ghate · Debdulal Mallick

Governments in emerging market and developing economies (EMDEs) routinely intervene in agricultural markets — procuring grain and redistributing it to poor households — in response to food price …

Michael Woodford

This paper works through a series of simple, analytically solvable New Keynesian models to show that the size of the government-spending multiplier depends almost entirely on the monetary policy …

Christopher A. Sims

Against the standard narrative that only monetary policy errors could have caused or prevented the 1970s US inflation, Sims documents dramatic swings in US fiscal stance over the period and shows, in …

Alan J. Auerbach · Maurice Obstfeld

Auerbach and Obstfeld argue that even if money and bonds are perfect substitutes at a zero short-term nominal interest rate -- the textbook reason open-market operations are said to be powerless in a …

Thomas J. Sargent

This paper studies the abrupt endings of four post-World War I European hyperinflations -- in Austria, Hungary, Poland, and Germany -- arguing that each stopped suddenly and at a comparatively low …

Marcus Hagedorn · Iourii Manovskii · Kurt Mitman

This paper builds a Heterogeneous Agent New Keynesian (HANK) model with incomplete markets, capital, and nominal price/wage rigidities -- with a government budget constraint specified in nominal terms …

Adrien Auclert · Matthew Rognlie · Ludwig Straub

This paper derives an "intertemporal Keynesian cross" showing that intertemporal marginal propensities to consume (iMPCs) are sufficient statistics for the output response of fiscal policy in …

Jess Benhabib · Stephanie Schmitt-Grohé · Martín Uribe

Benhabib, Schmitt-Grohe, and Uribe show that active interest-rate feedback ("Taylor") rules -- which raise the nominal rate more than one-for-one with inflation and are conventionally recommended as …

Christopher A. Sims

Outlining the fiscal theory of the price level and its implications for monetary policy under inflationary and deflationary stress, Sims argues that the Maastricht Treaty's elaborate monetary …

Sushant Acharya · Keshav Dogra

Using an analytically tractable heterogeneous-agent New Keynesian model with CARA preferences and normally distributed idiosyncratic income risk, the paper shows that whether incomplete markets …