It is widely understood that governments can finance expenditures through taxation, debt – that is, future taxes – or printing money. In this sense, monetary policy and fiscal policy are intertwined through the government budget constraint. For good reasons, though, societies have converged toward arrangements that provide a fair degree of separation between the functions of central banks and those of their fiscal authorities.
For example, in a world of fiat currency, central banks are generally assigned the responsibility for establishing and maintaining the value or purchasing power of the nation’s unit of account.