Can the fiscal theory of the price level explain UK inflation in the 1970s?

We investigate whether the Fiscal Theory of the Price Level can explain UK inflation in the 1970s. We find that fiscal policy was non-Ricardian and money growth entirely endogenous in this period. The implied model of inflation is tested in two ways: for its trend using cointegration analysis and for its dynamics using the method of indirect inference. We find that it is not rejected. We also find that the model's errors indicate omitted dynamics which merit further research.

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Year of publication:	2011
Authors:	Fan, Jingwen ; Minford, Patrick
Publisher:	Cardiff : Cardiff University, Cardiff Business School
Subject:	Finanzpolitik \| Öffentliche Ausgaben \| Inflationsrate \| Bootstrap-Verfahren \| Großbritannien \| UK Inflation \| Fiscal Theory of the Price Level \| Cointegration test \| Bootstrap simulation \| Indirect inference \| Wald statistic

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Series:	Cardiff Economics Working Papers ; E2009/26
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	622724479 [GVK] hdl:10419/65795 [Handle]
Classification:	E31 - Price Level; Inflation; Deflation ; E37 - Forecasting and Simulation ; E62 - Fiscal Policy; Public Expenditures, Investment, and Finance; Taxation ; E65 - Studies of Particular Policy Episodes
Source:	EconStor

Persistent link: https://www.econbiz.de/10010288823