Report
Is the "fiscal theory of the price level" relevant?
The “fiscal theory of the price level” says that if public debt sustainability is not ensured (if future discounted primary fiscal surpluses are not at the level of the public debt), there must be an upward price adjustment that reduces the public debt by the amount needed to ensure its sustainability. It is therefore a theory for determining the level of prices and not inflation. We question the relevance of this theory compared to alternative theories: Seigniorage, which is an inflation theory; A long-term effect of monetary policy on real interest rates. We believe that the fiscal theory of the price level can indeed apparently explain the sharp rise in inflation from 2021 to 2023, but that this is probably not the real explanation for recent inflation since this theory would have justified a much earlier onset of inflation.
Provider
Natixis
Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.
Other Reports from Natixis
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.