A macroeconomic theory of price determination

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Motivated by disputes over the quantity theory of money and the fiscal theory of the price level (the FTPL), I consider price determination in another macro model which can be used both in the short run and in the long run. It is a two-sector model with flexible prices and profit-maximizing firms. Government and the foreign sector are also included. It is assumed that prices are determined by supply and demand in the short run unlike in the quantity theory and the FTPL. In particular the determination of the price of consumption goods is pursued. Finally the FTPL is examined.

Original languageEnglish
Pages (from-to)214-227
Number of pages14
JournalStructural Change and Economic Dynamics
Publication statusPublished - 2021 Dec


  • Fiscal theory of the price level
  • Neoclassical synthesis
  • Price determination
  • Quantity theory of money

ASJC Scopus subject areas

  • Economics and Econometrics


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