Citigroup Advises Against the `Fiscal Theory of the Price Level’

In a recent Citigroup Global Economics View Research report, Willem Buiter discusses “Bad and Good ‘Fiscal Theories of the Price Level’.” Quoting my own work on the Fiscal Theory, Buiter warns that policy makers start to pay attention to the theory:

It does not often happen that a rather obscure technical bit of economic theory
merits an audience wider than the small band of academics who spend their waking
hours pondering such matters because that is the kind of thing they do. This note
addresses one of those occasions. The obscure economic theory in question is the
so-called fiscal theory of the price level (FTPL) …

The destruction of the logic of the FTPL by Buiter and Niepelt ought to have been
the end of the FTPL – their arguments were never refuted. … Recently, some of the originators of the original FTPL have tried to resurrect it …