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Stepping on a Rake : the Fiscal Theory of Monetary Policy

Cochrane, John H. - 2016

The fiscal theory of the price level can describe monetary policy. Governments can set interest rate targets and thereby affect inflation, with no change in fiscal surpluses. The same basic mechanism describes interest rate targets, forward guidance, open market operations, and quantitative...

Persistent link: https://www.econbiz.de/10012455701

Understanding Policy in the Great Recession : Some Unpleasant Fiscal Arithmetic

Cochrane, John H. - 2010

I use the valuation equation of government debt to understand fiscal and monetary policy in and following the great recession of 2008-2009, to think about fiscal pressures on US inflation, and what sequence of events might surround such an inflation. I emphasize that a fiscal inflation can come...

Persistent link: https://www.econbiz.de/10012462568

Long-term Debt and Optimal Policy in the Fiscal Theory of the Price Level

Cochrane, John H. - 1998

The fiscal theory says that the price level is determined by the ratio of nominal debt to the present value of real primary surpluses. I analyze long-term debt and optimal policy in the fiscal theory. I find that the maturity structure of the debt matters. For example, it determines whether news...

Persistent link: https://www.econbiz.de/10012472043

Does Policy Communication During Covid Work?

Coibion, Olivier - 2020

Using a large-scale survey of U.S. households during the Covid-19 pandemic, we study how new information about fiscal and monetary policy responses to the crisis affects households' expectations. We provide random subsets of participants in the Nielsen Homescan panel with different combinations...

Persistent link: https://www.econbiz.de/10012481579

A Fiscal Theory of Monetary Policy with Partially-Repaid Long-Term Debt

Cochrane, John H. - 2020

I construct a simple model with sticky prices and interest rate targets, closed by fiscal theory of the price level with long-term debt and fiscal and monetary policy rules. Fiscal surpluses rise following periods of deficit, to repay accumulated debt, but surpluses do not respond to arbitrary...

Persistent link: https://www.econbiz.de/10012479269

Fiscal Histories

Cochrane, John H. - National Bureau of Economic Research - 2022

The fiscal theory states that inflation adjusts so that the real value of government debt equals the present value of real primary surpluses. Monetary policy remains important. The central bank can set an interest rate target, which determines the path of expected inflation, while news about the...

Persistent link: https://www.econbiz.de/10013361983

Inflation Past, Present and Future : Fiscal Shocks, Fed Response, and Fiscal Limits

Cochrane, John H. - National Bureau of Economic Research - 2022

Our current inflation stemmed from a fiscal shock. The Fed is slow to react. Why? Will the Fed's slow reaction spur more inflation? I write a simple model that encompasses the Fed's mild projections and its slow reaction, and traditional views that inflation will surge without swift rate rises....

Persistent link: https://www.econbiz.de/10013210124

Monetary Policy with Interest on Reserves

Cochrane, John H. - 2014

I analyze monetary policy with interest on reserves and a large balance sheet. I show that conventional theories do not determine inflation in this regime, so I base the analysis on the fiscal theory of the price level. I find that monetary policy can peg the nominal rate, and determine expected...

Persistent link: https://www.econbiz.de/10012458052

Innocent Bystanders? Monetary Policy and Inequality in the U.S

Coibion, Olivier - 2012

We study the effects and historical contribution of monetary policy shocks to consumption and income inequality in the … income, consumption and total expenditures. Furthermore, monetary shocks can account for a significant component of the … historical cyclical variation in income and consumption inequality. Using detailed micro-level data on income and consumption, we …

Persistent link: https://www.econbiz.de/10012460490

Are the Effects of Monetary Policy Shocks Big or Small?

Coibion, Olivier - 2011

This paper studies the small estimated effects of monetary policy shocks from standard VAR's versus the large effects from the Romer and Romer (2004) approach. The differences are driven by three factors: the different contractionary impetus, the period of reserves targeting and lag length...

Persistent link: https://www.econbiz.de/10012461625