nep-mon New Economics Papers
on Monetary Economics
Issue of 2005‒08‒28
one paper chosen by
Bernd Hayo
Philipps-University Marburg

  1. Is the price level in Norway determined by fiscal policy? By Ragna Alstadheim

  1. By: Ragna Alstadheim (Norges Bank)
    Abstract: The Norwegian public sector has net financial assets. The fiscal theory of price determination applies equally to Norway and economies with net public debt: If primary surpluses evolve independently of nominal debt (or assets), the price level has to adjust to satisfy the intertemporal budget constraint of the public sector. In this ‘non-Ricardian’ regime, monetary policy cannot provide the nominal anchor. In the alternative ‘Ricardian’ regime, surpluses respond to debt, and monetary policy is the nominal anchor. The plausibility of NR regimes is disputed. I use fiscal data and oil prices to argue that the Norwegian regime is Ricardian. The fiscal theory of price
    Keywords: Price-level determinacy, fiscal policy, Richardian regime, nominal anchor
    JEL: E60 E63
    Date: 2005–08–19

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