TY  - JOUR
Y1  - 2018/04//
JF  - Journal of Economic Dynamics and Control
ID  - discovery10045948
SN  - 0165-1889
UR  - https://doi.org/10.1016/j.jedc.2018.01.006
A1  - Bassetto, M
A1  - Cui, W
EP  - 22
N1  - This version is the author accepted manuscript. For information on re-use, please refer to the publisher?s terms and conditions.
TI  - The fiscal theory of the price level in a world of low interest rates
SP  - 5
KW  - Fiscal theory of the price level
KW  -  Inflation
KW  -  Government debt
KW  -  Interest rates
KW  -  Dynamic inefficiency
AV  - public
VL  - 89
N2  - A central equation for the fiscal theory of the price level (FTPL) is the government budget constraint (or ?government valuation equation?), which equates the real value of government debt to the present value of fiscal surpluses. In the past decade, the governments of most developed economies have paid very low interest rates, and there are many other periods in the past in which this has been the case. In this paper, we revisit the implications of the FTPL in a world where the rate of return on government debt may be below the growth rate of the economy, considering different sources for the low returns: dynamic inefficiency, the liquidity premium of government debt, or its favorable risk profile
ER  -