Critiquing the Fiscal Theory of the Price Level

Central banks play a crucial role in modern economies, managing money supply, setting interest rates, and ensuring financial stability. But their relationship with governments, particularly their role as financial agents of the state, creates potential risks that could threaten economic stability. Does the way central banks are structured and operate obscure the true fiscal health of the state, and pose risks for the wider economy? That’s what Willem Buiter – former Chief Economist at Citigroup, former member of the Monetary Policy Committee of the Bank of England, among many other things – claims. 

In conversation with Tim Phillips, he sets out six challenges that central banks may face in the future and explains what central bankers can do about them. 

The discussion paper is here.