Disturbing the Fiscal Theory of the Price Level: Can it Fit the Eu-15?

ISEG-UTL Dept. of Economics Working Paper No. 1/2002/DE/CISEP

33 Pages Posted: 27 May 2002

See all articles by António Afonso

António Afonso

University of Lisbon - ISEG (School of Economics and Management); UECE (Research Unit on Complexity and Economics); ISEG Lisbon School of Economics and Management,Universidade de Lisboa; REM - Research in Economics and Mathematics

Date Written: April 2002

Abstract

With the fiscal theory of the price level (FTPL), Leeper-Sims-Woodford (LSW) argued that the government budget constraint plays a key role in determining the price level. Indeed, there could even be a dispute vis-a-vis the role of monetary policy in the formation of the price level. Apart from several theoretical criticisms, also addressed in the discussion given in this paper, the attempts to validate empirically the novel theory are, so far, rather sparse. Therefore, one of the purposes of this paper is to tentatively assess the possible empirical evidence, concerning the FTPL, for the EU-15 countries.

Keywords: fiscal theory of the price level, fiscal policy, EU-15, panel data models

JEL Classification: C23, E31, H63

Suggested Citation

Afonso, António, Disturbing the Fiscal Theory of the Price Level: Can it Fit the Eu-15? (April 2002). ISEG-UTL Dept. of Economics Working Paper No. 1/2002/DE/CISEP, Available at SSRN: https://ssrn.com/abstract=311122 or http://dx.doi.org/10.2139/ssrn.311122

António Afonso (Contact Author)

University of Lisbon - ISEG (School of Economics and Management) ( email )

R. Miguel Lupi, 20
Lisbon, 1248-078
Portugal
+351 21 392 5985 (Phone)
+351 21 396 6407 (Fax)

HOME PAGE: http://www.iseg.ulisboa.pt/aquila/homepage/aafonso/research

UECE (Research Unit on Complexity and Economics)

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Lisbon, 1249-078
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HOME PAGE: http://uece.rc.iseg.ulisboa.pt/

ISEG Lisbon School of Economics and Management,Universidade de Lisboa ( email )

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REM - Research in Economics and Mathematics ( email )

ISEG, Universidade de Lisboa
Rua Miguel Lupi, 20
Lisboa, 1249-078
Portugal

HOME PAGE: http://rem.rc.iseg.ulisboa.pt/

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