Central Banks as Fiscal Players: The Drivers of Fiscal and Monetary Policy Space [Hardcover]

This book develops a unified framework to address a number of key issues in monetary economics and public finance.The book develops a unified framework to address a number of key issues in monetary economics and public finance, including how helicopter money works, when modern monetary theory makes sense, why the Eurosystem has a potentially fatal design flaw, why the fiscal theory of the price level is a fallacy and how to escape from the zero lower bound.The book develops a unified framework to address a number of key issues in monetary economics and public finance, including how helicopter money works, when modern monetary theory makes sense, why the Eurosystem has a potentially fatal design flaw, why the fiscal theory of the price level is a fallacy and how to escape from the zero lower bound.It is well known that the balance sheets of most major central banks significantly expanded in the aftermath of the financial crisis of 2007-2011, but the consequences of this expansion are not well understood. This book develops a unified framework to explain how and why central bank balance sheets have expanded and what this shift means for fiscal and monetary policy. Buiter addresses a number of key issues in monetary economics and public finance, including how helicopter money works, when modern monetary theory makes sense, why the Eurosystem has a potentially fatal design flaw, why the fiscal theory of the price level is a fallacy and how to escape from the zero lower bound.Introduction; 1. The central bank balance sheet: why it matters; Appendix to chapter 1: stochastic discount factors; 2. A stylized set of accounts for the Treasury, the central bank and the State; 3. Helicopter money drops; 4. The fallacy of the fiscal theory of the price level  and why it matters; Appendix to chapter 4: a formal approach to the FTPL; 5. Life at the zero lower bound and how to escape from it; 6. Why the Eurosystem isn't a proper central bank  and how to make it one.'This book is tls¯