All of this is undoubtedly true and, in this regard, we can refer to a few brief comments on the evolution of the strategy implemented by the Bank of Italy between the 1970s and the 1980s to tackle the political and social changes underway, which are contained in a recent speech I gave (‘Luigi Einaudi’s Considerazioni finali’, Banca d’Italia, 2021).
Nevertheless, that the choice was deliberate, perhaps even made independently, and justified by the circumstances prevailing at the time, does not, in my opinion, alter its substance; that is (in the definition of fiscal dominance used by Gaiotti and Secchi, borrowed from Sargent) ‘a coordination scheme in which the fiscal authority acts first and independently sets its current and future deficits and surpluses, thus determining the overall amount of revenues that must be raised either through bond sales or seigniorage; the monetary authority operates under the constraints imposed by private demand for government bonds and the need to ensure the solvency of the fiscal authority’.