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Or is there “fiscal dominance” over the central bank, which is then forced to subordinate its own objectives to those of the fiscal authority? Because they naturally respond to the economic cycle, looking at the instruments of policy on their own (fiscal and monetary measures) doesn’t really help you that much in distinguishing one situation from the other. A better method might simply be to look directly at the institutional arrangements themselves (are monetary and fiscal policies determined by independent agencies? how is that independence safeguarded?). As this is ultimately a question of ends rather than means, a better measure still is the behaviour of objectives of policy. If inflation rises materially above its target, and if it tends to do so in particular when the public finances are under strain, that may be evidence of “fiscal dominance”. If, on the  1  See https://www.bankofengland.co.uk/research/bank-of-england-agenda-for-research. 2  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  2  other hand, easier monetary policy is necessary simply to stabilise inflation, and succeeds in doing so, it’s hard to see how it can qualify as “monetary finance”, no matter how the fiscal balance is behaving2. That’s not to say the fiscal position is wholly irrelevant because higher inflation may help – if only to a degree, and at a wider economic cost – in easing fiscal constraints. Very high levels of debt could therefore test those institutional arrangements.