- Home
- Publications
- The Fiscal Theory Of The Price Level In Overlapping Generations Models
The Fiscal Theory of the Price Level in Overlapping Generations Models



Downloads
DP498Authors
External Authors

Zabczyk, P
Related Themes
Monetary Theory and PolicyPaper Category Number
498
We demonstrate that the Fiscal Theory of the Price Level (FTPL) cannot be used to determine the price level uniquely in the overlapping generations (OLG) model. We provide two examples of OLG models, one with three 3-period lives and one with 62-period lives. Both examples are calibrated to an income profile chosen to match the life-cycle earnings process in U.S. data estimated by Guvenen et al. (2015). In both examples, there exist multiple steady-state equilibria. Our findings challenge established views about what constitutes a good combination of fiscal and monetary policies. As long as the primary deficit or the primary surplus is not too large, the fiscal authority can conduct policies that are unresponsive to endogenous changes in the level of its outstanding debt. Monetary and fiscal policy can both be active at the same time.
Related Blog Posts

Sticky Inflation and Sluggish Growth: What Lies Ahead for the UK Economy
Kemar Whyte
Stephen Millard
15 May 2023
5 min read

Inflation Rises to 10.4 per cent with a Bounce Back from the Big January Sales
Huw Dixon
22 Mar 2023
10 min read


Related Projects
Related News




Related Publications



Finance, Business Investment and Productivity
11 May 2023
UK Economic Outlook Box Analysis

Commentary: Monetary and Fiscal Policy Redux – The Mini-Budget
04 May 2023
National Institute Economic Review
Related events

2022 Dow Lecture: The Economy and Policy Trade-Off

Autumn Economic Forum

