Thus, even if fiscal policy has not yet reached its limit, the economic mechanisms attached to the fiscal theory of the price level might already swing into action. To be specific: let us assume that agents expect, with some probability, that monetary policy will bear the burden of adjustment and stabilise real government debt through higher inflation.
It is therefore not surprising that great disappointment followed the failure of the recent World Trade Organisation talks at Cancun to reach agreement on the lowering of agricultural subsidies in developed countries.