The backing of government bonds and monetarism

S. Rao Aiyagari, Mark Gertler

    Research output: Contribution to journalArticle

    Abstract

    This paper examines the implications of the fiscal backing of government bonds for the effects of conventional macroeconomic policies and, in particular, for certain monetarist propositions. It shows that the validity of some basic monetarist hypotheses requires a considerable degree of accommodation by the fiscal authority, relative to the central bank. Otherwise, government bonds may matter in a manner as described in the traditional literature [e.g., Patinkin (1965), Mundell (1971)], though some differences arise. Of perhaps independent interest, the framework developed in the analysis is an intertemporal general equilibrium model with all the descriptive features of the conventional flexible price IS/LM model.

    Original languageEnglish (US)
    Pages (from-to)19-44
    Number of pages26
    JournalJournal of Monetary Economics
    Volume16
    Issue number1
    DOIs
    StatePublished - 1985

    Fingerprint

    Government bonds
    Monetarism
    Fiscal
    Authority
    Accommodation
    Central bank
    General equilibrium model
    Macroeconomic policy

    ASJC Scopus subject areas

    • Economics and Econometrics
    • Finance

    Cite this

    The backing of government bonds and monetarism. / Rao Aiyagari, S.; Gertler, Mark.

    In: Journal of Monetary Economics, Vol. 16, No. 1, 1985, p. 19-44.

    Research output: Contribution to journalArticle

    Rao Aiyagari, S. ; Gertler, Mark. / The backing of government bonds and monetarism. In: Journal of Monetary Economics. 1985 ; Vol. 16, No. 1. pp. 19-44.
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