Fiscal Foundations of Inflation: Imperfect Knowledge

• 成果类型: Article
• 署名作者: Eusepi, Stefano; Preston, Bruce
• 署名单位: Federal Reserve System - USA; Federal Reserve Bank - New York; University of Melbourne
• 刊物名称: AMERICAN ECONOMIC REVIEW
• ISSN/ISSBN: 0002-8282
• DOI: 10.1257/aer.20131461
• 发表日期: 2018
• 页码: 2551-2589
• 关键词: monetary-policy; expectations; STABILITY; science; shocks; rules; debt

摘要

This paper proposes a theory of the fiscal foundations of inflation based on imperfect knowledge and learning. Because imperfect knowledge breaks Ricardian equivalence, the scale and composition of the public debt matter for inflation. High and moderate duration debt generates wealth effects on consumption demand that impairs the intertemporal substitution channel of monetary policy: aggressive monetary policy is required to anchor inflation expectations. Counterfactual experiments conducted in an estimated model reveal that the US economy would have been substantially more volatile over the Great Inflation and Great Moderation periods if US debt levels had been those observed in Italy or Japan.