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Tag Archives: Fiscal policy

Fiscal-Monetary Policy Interaction

In the Richmond Fed’s Econ Focus, Eric Leeper explains his views. Disparate confounding dynamics and simple policy rules: My view is that central banks have put far too many resources into understanding tiny fluctuations and too few resources into the things that actually matter. … Something like the basic Taylor rule doesn’t really serve as a useful litmus test for what policy is doing in the face of these DCDs, so it’s a little bizarre to me that a lot of central banks routinely calculate...

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Views on the Fiscal Theory of the Price Level

A conference at the University of Chicago’s Becker Friedman Institute addressed the status of the Fiscal Theory of the Price Level and the theory’s implications for current policy. Slides and papers are available on the conference website. Given that the conference was meant to resuscitate research on the FTPL and that the participants were selected accordingly, many contributions appear rather mainstream. Chris Sims worries about indeterminacy of the price level if monetary policy is...

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Helicopter Drops of Money

In his blog, Ben Bernanke discusses the merits of “helicopter drops” as a monetary policy tool. [A] “helicopter drop” of money is an expansionary fiscal policy—an increase in public spending or a tax cut—financed by a permanent increase in the money stock. … the Fed credits the Treasury … in the Treasury’s “checking account” at the central bank, and those funds are used to pay for the new spending and the tax rebate. … it should influence the economy through a number of channels, making it...

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