Researchers characterizing optimal tax policies for dynamic economies have reasoned that optimally chosen tax rates should approximately follow a random walk. We conduct a frequency-domain examination of the properties of the tax rate series and conclude that while there is a substantial...

I show that a determinate, finite price level can be achieved in an economy with no monetary frictions, and no commodity standard or other explicit redemption commitment. I make one small modification to a standard cash in advance model: I reopen the security market at the end of the day. With...

It is not common for an entire scholarly literature to be based on a fallacy, that is, 'on faulty reasoning; misleading or unsound argument'. The 'fiscal theory of the price level', recently re-developed by Woodford, Cochrane, Sims and others, is an example of a fatally flawed research...

If a specified amount of government spending must be financed, how should that finance be divided between taxes and government borrowing? In the case of a temporary increase in government spending, it has been argued that debt finance is optimal because the small increments in all future tax...

We establish two underappreciated facts about costly search. First, unless demand is perfectly inelastic, search frictions can result in significant deadweight loss by decreasing consumption. Second, whenever cross-price elasticities are non-zero, costly search in one market also affects...

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...

We demonstrate that the Fiscal Theory of the Price Level (FTPL) cannot be used to determine the price level uniquely in the overlapping generations (OLG) model. We provide two examples of OLG models, one with three 3-period lives and one with 62-period lives. Both examples are calibrated to an...