The Fiscal Theory of the Price Level with a Bubble

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.

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Year of publication:	2020
Authors:	Brunnermeier, Markus K. ; Merkel, Sebastian ; Sannikov, Yuliy
Publisher:	Munich : Center for Economic Studies and ifo Institute (CESifo)

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Series:	CESifo Working Paper ; 8278
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	169802181X [GVK] hdl:10419/217029 [Handle] RePec:ces:ceswps:_8278 [RePEc]
Classification:	E44 - Financial Markets and the Macroeconomy ; E52 - Monetary Policy (Targets, Instruments, and Effects) ; E63 - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization
Source:	EconStor

Persistent link: https://www.econbiz.de/10012214189