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Working paper

“Неприятная монетаристская арифметика”? Роль переходной монетарной динамики

In the celebrated paper “Some unpleasant monetarist arithmetic,” Sargent and Wallace (1981) showed that tight monetary policy is not feasible unless it is not supported by appropriate fiscal adjustment. In this paper we explore a simple forward-looking monetary model to show that gradual or anticipated tightening of monetary policy is not necessarily characterized by “unpleasant arithmetic.” This is due to possible short-run gains in seigniorage revenues during the transition period. By applying the principle of sustainable macroeconomic policy that constrains the future choices of both fiscal and monetary authorities, we show that high interest rates on public debt work for the benefit of “pleasant arithmetic.”