Table Of ContentCentral Banks as Fiscal Players
Itiswellknownthatthebalancesheetsofmostmajorcentralbanks
significantly expanded in the aftermath of the financial crisis of
2007–2011, but the consequences of this expansion are not well
understood.Thisbookdevelopsaunifiedframeworktoexplainhow
and why central bank balance sheets have expanded and what this
shiftmeansforfiscalandmonetarypolicy.Buiteraddressesanumber
of key issues in monetary economics and public finance, including
howhelicoptermoneyworks,whenmodernmonetarytheorymakes
sense,whytheEurosystemhasapotentiallyfataldesignflaw,whythe
fiscaltheoryofthepricelevelisafallacyandhowtoescapefromthe
zerolowerbound.
willem buiter is Visiting Professor of International and Public
Affairs at Columbia University. He was an academic economist for
twenty-eight years. He was a founding external member of the
Monetary Policy Committee of the Bank of England from 1997 to
2000and hasbeen an adviserto theIMF, the WorldBank, theInter-
American Development Bank, the European Commission, central
banksandfinanceministriesacrosstheworld.
federico caffe` lectures
This series of annual lectures was initiated to honour the memory of
Federico Caffè. They are jointly sponsored by the Department of Public
EconomicsattheUniversityofRome,whereCaffèheldachairfrom1959
to 1987, and the Bank of Italy, where he served for many years as an
advisor.Thepublicationofthelectureswillprovideavehicleforleading
scholarsintheeconomicsprofession,andfortheinterestedgeneralreader,
toreflectonthepressingeconomicandsocialissuesofthetimes.
OtherBooksinThisSeries
NicolaAcocella,RediscoveringEconomicPolicyasaDiscipline(2018)
SamuelBowles,TheNewEconomicsofInequalityandRedistribution
(2012)
JánosKornaiandKarenEggleston,Welfare,ChoiceandSolidarityin
Transition:ReformingtheHealthSectorinEasternEurope(2010)
PaoloSylosLabini,Underdevelopment:AStrategyforReform(2010)
Serge-ChristopheKolm,Reciprocity:AnEconomicsofSocial
Relations(2009)
AugustoGraziani,TheMonetaryTheoryofProduction(2009)
LuigiL.Pasinetti,KeynesandtheCambridgeKeynesians(2009)
Jean-JacquesLaffont,RegulationandDevelopment(2005)
RobertM.Solow,MonopolisticCompetitionandMacroeconomic
Theory(1998)
EdmondMalinvaud,DiagnosingUnemployment(1994)
Central Banks as Fiscal
Players
The Drivers of Fiscal and Monetary
Policy Space
willem buiter
ColumbiaUniversity
UniversityPrintingHouse,CambridgeCB28BS,UnitedKingdom
OneLibertyPlaza,20thFloor,NewYork,NY10006,USA
477WilliamstownRoad,PortMelbourne,VIC3207,Australia
314–321,3rdFloor,Plot3,SplendorForum,JasolaDistrictCentre,
NewDelhi–110025,India
79AnsonRoad,#06–04/06,Singapore079906
CambridgeUniversityPressispartoftheUniversityofCambridge.
ItfurtherstheUniversity’smissionbydisseminatingknowledgeinthepursuitof
education,learning,andresearchatthehighestinternationallevelsofexcellence.
www.cambridge.org
Informationonthistitle:www.cambridge.org/9781108842822
DOI:10.1017/9781108904292
©WillemBuiter2021
Thispublicationisincopyright.Subjecttostatutoryexception
andtotheprovisionsofrelevantcollectivelicensingagreements,
noreproductionofanypartmaytakeplacewithoutthewritten
permissionofCambridgeUniversityPress.
Firstpublished2021
AcataloguerecordforthispublicationisavailablefromtheBritishLibrary.
ISBN978-1-108-84282-2Hardback
ISBN978-1-108-82276-3Paperback
CambridgeUniversityPresshasnoresponsibilityforthepersistenceoraccuracyof
URLsforexternalorthird-partyinternetwebsitesreferredtointhispublication
anddoesnotguaranteethatanycontentonsuchwebsitesis,orwillremain,
accurateorappropriate.
Central Banks as Fiscal Players
Itiswellknownthatthebalancesheetsofmostmajorcentralbanks
significantly expanded in the aftermath of the financial crisis of
2007–2011, but the consequences of this expansion are not well
understood.Thisbookdevelopsaunifiedframeworktoexplainhow
and why central bank balance sheets have expanded and what this
shiftmeansforfiscalandmonetarypolicy.Buiteraddressesanumber
of key issues in monetary economics and public finance, including
howhelicoptermoneyworks,whenmodernmonetarytheorymakes
sense,whytheEurosystemhasapotentiallyfataldesignflaw,whythe
fiscaltheoryofthepricelevelisafallacyandhowtoescapefromthe
zerolowerbound.
willem buiter is Visiting Professor of International and Public
Affairs at Columbia University. He was an academic economist for
twenty-eight years. He was a founding external member of the
Monetary Policy Committee of the Bank of England from 1997 to
2000and hasbeen an adviserto theIMF, the WorldBank, theInter-
American Development Bank, the European Commission, central
banksandfinanceministriesacrosstheworld.
federico caffe` lectures
This series of annual lectures was initiated to honour the memory of
Federico Caffè. They are jointly sponsored by the Department of Public
EconomicsattheUniversityofRome,whereCaffèheldachairfrom1959
to 1987, and the Bank of Italy, where he served for many years as an
advisor.Thepublicationofthelectureswillprovideavehicleforleading
scholarsintheeconomicsprofession,andfortheinterestedgeneralreader,
toreflectonthepressingeconomicandsocialissuesofthetimes.
OtherBooksinThisSeries
NicolaAcocella,RediscoveringEconomicPolicyasaDiscipline(2018)
SamuelBowles,TheNewEconomicsofInequalityandRedistribution
(2012)
JánosKornaiandKarenEggleston,Welfare,ChoiceandSolidarityin
Transition:ReformingtheHealthSectorinEasternEurope(2010)
PaoloSylosLabini,Underdevelopment:AStrategyforReform(2010)
Serge-ChristopheKolm,Reciprocity:AnEconomicsofSocial
Relations(2009)
AugustoGraziani,TheMonetaryTheoryofProduction(2009)
LuigiL.Pasinetti,KeynesandtheCambridgeKeynesians(2009)
Jean-JacquesLaffont,RegulationandDevelopment(2005)
RobertM.Solow,MonopolisticCompetitionandMacroeconomic
Theory(1998)
EdmondMalinvaud,DiagnosingUnemployment(1994)
Central Banks as Fiscal
Players
The Drivers of Fiscal and Monetary
Policy Space
willem buiter
ColumbiaUniversity
UniversityPrintingHouse,CambridgeCB28BS,UnitedKingdom
OneLibertyPlaza,20thFloor,NewYork,NY10006,USA
477WilliamstownRoad,PortMelbourne,VIC3207,Australia
314–321,3rdFloor,Plot3,SplendorForum,JasolaDistrictCentre,
NewDelhi–110025,India
79AnsonRoad,#06–04/06,Singapore079906
CambridgeUniversityPressispartoftheUniversityofCambridge.
ItfurtherstheUniversity’smissionbydisseminatingknowledgeinthepursuitof
education,learning,andresearchatthehighestinternationallevelsofexcellence.
www.cambridge.org
Informationonthistitle:www.cambridge.org/9781108842822
DOI:10.1017/9781108904292
©WillemBuiter2021
Thispublicationisincopyright.Subjecttostatutoryexception
andtotheprovisionsofrelevantcollectivelicensingagreements,
noreproductionofanypartmaytakeplacewithoutthewritten
permissionofCambridgeUniversityPress.
Firstpublished2021
AcataloguerecordforthispublicationisavailablefromtheBritishLibrary.
ISBN978-1-108-84282-2Hardback
ISBN978-1-108-82276-3Paperback
CambridgeUniversityPresshasnoresponsibilityforthepersistenceoraccuracyof
URLsforexternalorthird-partyinternetwebsitesreferredtointhispublication
anddoesnotguaranteethatanycontentonsuchwebsitesis,orwillremain,
accurateorappropriate.
Central Banks as Fiscal Players
Itiswellknownthatthebalancesheetsofmostmajorcentralbanks
significantly expanded in the aftermath of the financial crisis of
2007–2011, but the consequences of this expansion are not well
understood.Thisbookdevelopsaunifiedframeworktoexplainhow
and why central bank balance sheets have expanded and what this
shiftmeansforfiscalandmonetarypolicy.Buiteraddressesanumber
of key issues in monetary economics and public finance, including
howhelicoptermoneyworks,whenmodernmonetarytheorymakes
sense,whytheEurosystemhasapotentiallyfataldesignflaw,whythe
fiscaltheoryofthepricelevelisafallacyandhowtoescapefromthe
zerolowerbound.
willem buiter is Visiting Professor of International and Public
Affairs at Columbia University. He was an academic economist for
twenty-eight years. He was a founding external member of the
Monetary Policy Committee of the Bank of England from 1997 to
2000and hasbeen an adviserto theIMF, the WorldBank, theInter-
American Development Bank, the European Commission, central
banksandfinanceministriesacrosstheworld.
