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Fiscal Policy and the Price Level
1University of Rome ‘Tor Vergata’, email@example.com
2University of Rome ‘Tor Vergata’, firstname.lastname@example.org
Citation Information: Topics in Macroeconomics. Volume 5, Issue 1, Pages –, ISSN (Online) 1534-5998, DOI: 10.2202/1534-5998.1225, June 2005
- Published Online:
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.