Key points are not available for this paper at this time.
Maintaining price stability requires not only commitment to an appropriate monetary policy rule, but an appropriate fiscal policy rule as well. Ricardian equivalence does not imply that fiscal policy is irrelevant, except in the case of a certain class of policies (Ricardian policies). The role of fiscal developments in inflation determination under a non-Ricardian regime is illustrated through an analysis of the bond-price support regime of the 1940s. A monetary-fiscal regime with attractive properties would combine a Taylor rule for monetary policy with nominal-deficit targeting as a fiscal policy commitment. # O#cial text of the 2000 Money, Credit and Banking Lecture, presented at Ohio State University on May 1, 2000. I wish to thank Michael Bordo, Matt Canzoneri, Steve Cecchetti, Larry Christiano, John Cochrane, Paul Evans, Eduardo Loyo, Bennett McCallum, Helene Rey, Stephanie Schmitt-Grohe and Chris Sims for helpful discussions, Gauti Eggertsson for research assistance...
Michael Woodford (Mon,) studied this question.