This paper studies, within a simple "ad hoc" macroeconomic model not derived from individuals' and firms' optimizing behavior but built to resemble the macroeconometric models of the time, how the …
PublishedClassicQuarterly Review (Federal Reserve Bank of Minneapolis)Published Oct 1981
Sargent and Wallace show that even in a fully monetarist economy, a monetary authority that tightens money today while an independent fiscal authority's deficits are taken as given must finance the …