A primer on monetary and fiscal policy

Thomas J. Sargent

    Research output: Contribution to journalArticlepeer-review


    Monetary policy can be constrained by fiscal policy if fiscal deficits grow large enough to require monetization of government debt. That fact implies that the administrative independence of central banks does not by itself imply that monetary policy is independent of the fiscal decisions of governments. This essay describes limitations, possibilities, and suitable goals for monetary policy within the existing pattern of institutional responsibilities. The economic limitations of what can be achieved by monetary policy are summarized in six propositions developed in the paper.

    Original languageEnglish (US)
    Pages (from-to)1463-1482
    Number of pages20
    JournalJournal of Banking and Finance
    Issue number10
    StatePublished - Oct 1999


    • E3
    • E4
    • E5
    • E6
    • Fiscal policy
    • Inflation
    • Monetary policy
    • Neutrality
    • Rational expectations

    ASJC Scopus subject areas

    • Finance
    • Economics and Econometrics


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