[1] is an important literature in the field of the fiscal theory of price level. However, I prove that the equations of (39) in [1] are wrong and provide the correct results. I also find that the mistake of equations of (39) affects the rest of [1], which is based on the establishment of equations of (39). I list all the results in [1] that cannot be established due to the mistake of equations of (39). Considering the importance of [1] in the field of fiscal theory of price level, all knowledge developed by far based on the results that cannot be established in [1] should be re-examined.
References
[1]
Atkeson, A., Chari, V.V. and Kehoe, P.J. (2010) Sophisticated Monetary Policies. Quarterly Journal of Economics, 125, 47-89. https://doi.org/10.1162/qjec.2010.125.1.47
[2]
Cochrane, J. (2023) The Fiscal Theory of Price Level. Princeton University Press, Princeton. https://doi.org/10.1353/book.109854
[3]
Margalit, D., Rabinoff, J. and Williams, B. (2024) Interactive Linear Algebra. https://personal.math.ubc.ca/~tbjw/ila/ila.pdf
[4]
Cochrane, J. (2011) Determinacy and Identification with Taylor Rules. Journal of Political Economy, 119, 565-615. https://doi.org/10.1086/660817
[5]
Mertens, K. and Raven, M. (2014) Fiscal Theory in an Expectations-Driven Liquidity Trap. Review of Economic Studies, 81, 1637-1667. https://doi.org/10.1093/restud/rdu016
[6]
Canzoneri, M., Cumby, R., and Diba, B. (2010) The Interaction Between Monetary and Fiscal Policy. Handbook of Monetary Economics, 3, 935-999. https://doi.org/10.1016/B978-0-444-53454-5.00005-0
[7]
Bassetto, M. (2002) A Game-Theoretic View of the Fiscal Theory of the Price Level. Econometrica, 70, 2167-2195. https://doi.org/10.1111/1468-0262.00373
