Infinite-maturity public debt and the fiscal theory of the price level

The fiscal theory of the price level asserts that the price level is determined by the ratio of outstanding public nominal debt into the present value of real primary budget surpluses of the government. We here argue that price determinacy, in general, fails when at least part of the public debt takes the form of securities of infinite maturity. Indeed, price determinacy requires non-Ricardian fiscal plans and a predetermined nominal debt of the government. As no equilibrium restriction prevents the occurrence of a speculative bubble on infinite-maturity public debt, the initial nominal debt of the government is indeterminate and so is the price level under canonical specifications of non-Ricardian fiscal plans.