This paper analyzes the quantitative significance of Sargent and Wallace's (1981) "Some Unpleasant Monetarist Arithmetic" in a model that is parameterized to correspond with U.S. data. The major result is that the monetarist arithmetic is not overly unpleasant and that the nominal side of the...

This paper analyzes the quantitative significance of Sargent and Wallace's (1981) "Some Unpleasant Monetarist Arithmetic" in a model that is parameterized to correspond with U.S. data. The major result is that the monetarist arithmetic is not overly unpleasant and that the nominal side of the...

The celebrated monetarist arithmetic argument of Sargent and Wallace implies outcomes that may be large and unpleasant. But a dynamic stochastic model calibrated to the U.S. economy reveals the quantitative effect of monetarist arithmetic to be small. Monetary policies that react to the level of...

Recently, the Office of Management and Budget projected that the fiscal 1985 federal budget deficit would exceed $200 billion and that out-year reductions would be gradual at best. These prospects have engendered a debate concerning the economic effects of government deficits and the attendant...