Economics, Econometrics and Finance
4 years ago

US Fiscal Policy Shifts Impact Price Levels: Post-War History Revealed.

RePEc: Research Papers in Economics
The Fiscal Theory of the Price Level: Identifying Restrictions and Empirical Evidence
Luca Sala

Paper Summary

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The paper tests the fiscal theory of the price level by analyzing US fiscal policy from 1960-1979 and since 1990. The researchers use a model that includes real effects of fiscal policy in different scenarios. They find that US fiscal policy was Non-Ricardian in the 1960s-1970s but became Ricardian after 1990. This shows that the fiscal theory of the price level applies to a specific period in US history.