by Bennett T. McCallum
e21 – Economic Policies for the 21st Century
March 21, 2014
The policy actions taken by the Federal Reserve over the past six years have left the United States in an unusual condition that has led some prominent economists to suggest that the messages provided by the “Fiscal Theory of the Price Level” (henceforth, FTPL) will be of crucial importance in the near future. The most prominent of these writings, arguably, has been a piece by Christopher Sim in the American Economic Review. In the present paper I wish to bring up to date Friedman’s divergent monetarist position: “I don’t think monetary policy has to be backed up by fiscal policy at all. I think monetary policy can curb inflation.”

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