Some Pleasant Monetarist Arithmetic

Michael Darby ()

No 1295, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Contrary to the conclusion of Sargent and Wallace, it is possible to exogenously and independently vary monetary and fiscal policy and retain steady-state equlibrium in economies like the United States. In particular,the central bank is not forced to monetize increased deficits either now or in the future. This conclusion is based on the fact that the real after-tax yield on government bonds is considerably less than the growth rate of real income except during brief disinflationary periods.

Date: 1984-03
Note: ITI IFM
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Published as Darby, Michael R. "Some Pleasant Monetarist Arithmetic." Federal Reserve Bank of Minneapolis Quarterly Review, Vol.8, No. 2, (Spring 1984), pp. 15-2 0.

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