American Economic Review: Vol. 103 No. 2 (April 2013)


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Paper Money

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Sims, Christopher A. 2013. "Paper Money." American Economic Review, 103(2): 563-84.

DOI: 10.1257/aer.103.2.563


Drastic changes in central bank operations and monetary institutions in recent years have made previously standard approaches to explaining the determination of the price level obsolete. Recent expansions of central bank balance sheets and of the levels of rich-country sovereign debt, as well as the evolving political economy of the European Monetary Union, have made it clear that fiscal policy and monetary policy are intertwined. Our thinking and teaching about inflation, monetary policy, and fiscal policy should be based on models that recognize fiscal-monetary policy interactions. (JEL E31, E52, E58, E62, H63)

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Sims, Christopher A. (Princeton U)

JEL Classifications

E31: Price Level; Inflation; Deflation
E52: Monetary Policy
E58: Central Banks and Their Policies
E62: Fiscal Policy
H63: National Debt; Debt Management; Sovereign Debt

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