A BEJM Topics article.

Abstract

This paper studies the issue of price stability in a continuous time optimizing general equilibrium model with overlapping generations. It is shown that fiscal policy has effects on nominal variables. Fiscal expansions are inflationary even when the government intertemporal budget constraint is respected for any prices sequence and there is no recourse to money financing. Our results shed new light on the interaction between fiscal policy and nominal prices.

Submitted: May 14, 2004 · Accepted: July 23, 2004 · Published: June 28, 2005

Originally published in Topics in Macroeconomics.

Recommended Citation

Annicchiarico, Barbara and Marini, Giancarlo (2005) "Fiscal Policy and the Price Level," Topics in Macroeconomics: Vol. 5 : Iss. 1, Article 13.
Available at: http://www.bepress.com/bejm/topics/vol5/iss1/art13