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Cited by 423

The DOI matches its Crossref record; 17 of the 17 references it cites were found in a registry or an index.

Control of the Public Debt: A Requirement for Price Stability?

Open access
Woodford, Michael·1996·National Bureau of Economic Research
DOI 10.3386/w5684
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Abstract

The paper considers the role of limits upon the permissible growth of public debt, like those stipulated in the Maastricht treaty, in making price stability possible, It is shown that a certain type of fiscal instability, namely variations in the present value of current and future primary government budgets, necessarily results in price level instability, in the sense that there exists no possible monetary policy that results in an equilibrium with stable prices.In the presence of sluggish price adjustment, the fiscal shocks disturb real output and real interest rates as well.On the other hand, shocks of this kind can be eliminated by a Maastricht-type limit on the value of the public debt.In the presence of the debt limit (and under assumptions of frictionless financial markets, etc.), "Ricardian equivalence" holds, and fiscal shocks have no effects upon real or nominal variables.Furthermore, an appropriate monetary policy rule can ensure price stability even in the face of other kinds of real shocks.Thus the debt limit serves as a precondition for the common central bank in a monetary union to be charged with responsibility for maintaining a stable value for the common currency.

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Metadata

Authors
Woodford, M.
Venue
National Bureau of Economic Research
Publisher
National Bureau of Economic Research
Published
1996-07
DOI
10.3386/w5684
OpenAlex
W3122230798
Cited by
423
References
17
Type
report
Language
en
Open access
green

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CoChat. (2026). Citation check: Control of the Public Debt: A Requirement for Price Stability? https://app.cochat.ai/papers/10.3386/w5684
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Woodford, M. (1996). Control of the Public Debt: A Requirement for Price Stability? National Bureau of Economic Research. https://doi.org/10.3386/w5684

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