This paper revisits the size of the fiscal multiplier. The experiment is a fiscal expansion under the assumption of a pegged nominal rate of interest. We demonstrate that a quantitatively important issue is the articulation of the exit from the policy experiment. If the monetary-fiscal expansion...

A traditional function of the central bank is to control the price level. The fiscal theory of the price level challenges this assumption, arguing instead that the fiscal authority's budgetary policy is the primary determinant of the price level. The authors provide a critical review of the...

Is inflation (in the often-quoted words of Milton Friedman) "always and everywhere a monetary phenomenon"? Some say no, arguing that inflation is controlled not only by the central bank but also by the fiscal authority. This Commentary authors explore their argument, known as the fiscal theory...

At the zero lower bound (ZLB), expectations about the future path of monetary or fiscal policy are crucial. We model expectations formation under level-k thinking, a form of bounded rationality introduced by García-Schmidt and Woodford (2019) and Farhi and Werning (2017), consistent with...