BoC paper: fiscal and monetary interdependence

A new working paper by the Bank of Canada studies the interdependence between fiscal and monetary policies, and their joint role in the determination of the price level.

"The government is characterised by a long-run fiscal policy rule whereby a given fraction of the outstanding debt is backed by the present discounted value of current and future primary surpluses. The remaining debt is backed by seigniorage revenue," the paper's author, Carlos de Resende, explains.

It is shown that in a

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