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The Fiscal Theory of the Price Level

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A traditional function of the central bank is to control the price level. The fiscal theory of the price level challenges this assumption, arguing instead that the fiscal authority's budgetary policy is the primary determinant of the price level. The authors provide a critical review of the fiscal theory and its implications for monetary policy.

Suggested citation: Carlstrom, Charles, and Timothy Fuerst. “The Fiscal Theory of the Price Level,” Federal Reserve Bank of Cleveland, Economic Review, vol. 36, no. 1, pp. 22-32, 03.01.2000.

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