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...

The paper first reviews the budget identities of the fiscal and monetary authorities and the solvency constraint or present value budget-constraint of the consolidated public sector, for closed and open economies. It then discusses the new conventional wisdom concerning the fiscal roots of...

In an earlier paper,"Granger-causality and Policy Effectiveness," Economica [1984], I showed that for a policy instrument x to Granger-cause some target variable y is not necessary for x to be useful in controlling y. (The argument that it is not sufficient was already familiar, e.g. from the...

Debt neutrality is said to occur if, given a program for public spending on current goods and services over time, the real equilibrium of the economy (private consumption, investment, relative prices, etc.) is independent of the pattern of government borrowing and lump-sum taxation over time....

The paper studies an idealized gold standard in a two-country setting. Without flexible national domestic credit expansion (dce)policies which offset the effect of money demand shocks on international gold reserves, the gold standard collapses with certainty in finite time through a speculative...

The paper extends the recent literature on collapsing managed exchange rate regimes by allowing explicitly for the qovernment budget constraint and the interest cost of servicing the public debt. The policy experivent that is analysed is the decision by a government to replenish its stock of...

The paper presents a non-technical survey of some of the issues involved in the design of stabilization policy 10 developng countries with special emphasis on policy responses to external shocks. First, the six imost imortant external economic parameters of developing countries are reviewed; I)...

The note mines an unsuspected lode in the Sargent-Wallace "Unpleasant Monetarist Arithmetic" deposit. While that model is shown to be incapable of generating hyperinflations as a result of large monetized public sector deficits, it can generate hyperdeflations or perhaps more accurately, the...

The paper uses a small analytical two-region (the United States and the Rest of the Industrial World) model, to analyze three issues Concerning international economic interdependence and macroeconomic policy coordination that have been raised in connection with the September1985 World Economic...

The paper studies the design of efficient anti-inflationary policies in a two-country interdependent economic system. A number of alternative specifications of the price formation process are considered, incorporating successively higher degrees of price level and inflation inertia.Only in the...