Recalculating Sargent and Wallace’s “Some Unpleasant Monetarist Arithmetic”

Abstract

This note revisits and extends the seminal analysis by Sargent and Wallace, originally framed in terms of money growth rates. Here, I reexamine their model through two complementary lenses, treating the policy instrument as either (i) a sequence of interest rates or (ii) a sequence of seigniorage. In the process, I revisit Sargent and Wallace’s “spectacular” example and offer a variant that strengthens their conclusions.

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