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Economic Commentary

Price Stability: Is a Tough Central Bank Enough?

How can price stability be achieved? Conventional wisdom says that a tough, independent central bank is all that is necessary. However, a new view—known as the fiscal theory of the price level—argues that an appropriate fiscal policy is also required, no matter how tough the central bank may be. Whether one accepts the conventional or the fiscal theory view has significant implications for the way central banks should do business.

The views authors express in Economic Commentary are theirs and not necessarily those of the Federal Reserve Bank of Cleveland or the Board of Governors of the Federal Reserve System. The series editor is Tasia Hane. This paper and its data are subject to revision; please visit for updates.

Suggested Citation

Christiano, Lawrence, and Terry J. Fitzgerald. 2000. “Price Stability: Is a Tough Central Bank Enough?” Federal Reserve Bank of Cleveland, Economic Commentary 8/1/2000.

This work by Federal Reserve Bank of Cleveland is licensed under Creative Commons Attribution-NonCommercial 4.0 International