John Cochrane has a new working paper in which he analyzes fiscal policy using the valuation equation of government debt and a money demand equation. Here is the abstract:
I use the valuation equation of government debt to understand fiscal and monetary policy in and following the great recession of 2008-2009, to think about fiscal pressures on US inflation, and what sequence of events might surround such an inflation. I emphasize that a fiscal inflation can come well before large deficits or monetization are realized, and is likely to come with stagnation rather than a boom.
As with everything from Cochrane, it is well-written and accessible to a broad audience. A non-gated link to the paper is here. For those who favor a shorter version, go here.
It’s Nice Post, keep posting and have a nice day… 08:52