What conclude effects of an anticipated money-?nanced de?cit

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Modern classical macroeconomics argues that anticipated monetary policy does not have real effects. The new classical macroeconomics argues that anticipated ?scal policy also does not have real effects. Adapt the Lucas-Sargent-Wallace model to explicitly incorporate both of these propositions. From this model, what would you conclude for the effects of (i) an anticipated bond-?nanced de?cit, (ii) an anticipated money-?nanced de?cit? Specify your procedure and estimating equations for testing the validity of your conclusions.

Reference no: EM13897719

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