Reflections on the Fiscal Theory of the Price Level

Abstract

In a world in which consumers correctly expect that both Ricardian and non-Ricardian policy regimes are possible in the future, the fiscal theory of the price level is valid, yet the price is indeterminate. This result does not rely on imposing that the initial stock of nominal bonds be strictly positive, and it does not require a surprise ex post revaluation of nominal assets.

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