Fiscal and Monetary Policies Interrelation and Inflation over the Long Run: Testing Sargent and Wallace’s View for the United States
نویسنده
چکیده
This paper focuses on long-run estimation of the price equation in the United States for the period of 1973Q1-2011Q3. It was found the Sargent and Wallace view that an easy monetary policy today will result in a lower price level over the long run when debt and deficit exist is true for the United Sates. Furthermore, it was found that, over the long run, a higher real exchange rate, government expenditures, deficit per GDP as well as debt per GDP lead to a higher price level. Finally, it was found neither monetary policy dominates the fiscal policy nor the opposite is true.
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