John Cochrane's FTPL: Inflation and Debt

Grounded in the Fiscal Theory of the Price Level (FTPL), Cochrane bridges monetary and fiscal policy through the lens of asset pricing to clarify how macroeconomic policies actually interact. The central premise of FTPL is straightforward:

Real Government Debt = PV(Future Primary Surpluses)
Here, the real SDF acts as an input, while the price level is determined as the equilibrium output.


From Cochrane's lecture slide

One of the key strengths of FTPL that Cochrane emphasizes is that it shows how raising interest rates reduces output and brings down inflation—just as commonly expected. Of course, I feel there are still many aspects of the story that I have yet to fully understand.

Still, I believe the following lecture series by a leading scholar synthesizing asset pricing, monetary policy, and fiscal theory will broaden and deepen our understanding of inflation. His papers are conceptually demanding, so these lectures serve as an invaluable guide to truly digesting them.


2026 lecture

2025 lecture

2021 Lecture on FTPL