- Title
- The Fiscal Theory of the Price Level with a Bubble
- Author(s)
- Markus Brunnermeier Markus Brunnermeier (Princeton University)
- Sebastian Merkel Sebastian Merkel (Princeton University)
- Yuliy Sannikov Yuliy Sannikov (Stanford University)
- Abstract
- This paper incorporates a bubble term in the standard FTPL equation to explain why countries with persistently negative primary surpluses can have a positively valued currency and low inflation. It also provides an example with closed-form solutions in which idiosyncratic risk on capital returns depresses the interest rate on government bonds below the economy’s growth rate.
- Creation Date
- 2020-05
- Section URL ID
- Paper Number
- 2020-47
- URL
- https://scholar.princeton.edu/sites/default/files/markus/files/04a_ftpl_bubble_paper.pdf
- File Function
- Jel
- E44, E52, E63
- Keyword(s)
- Fiscal policy, Monetary Economics
- Suppress
- false
- Series
- 13