For example, Sargent and Wallace’s “unpleasant monetarist arithmetic” suggested that a near-term tightening of monetary policy, by making the long-term fiscal situation less tenable, could (in principle at least) lead to inflation, because the public will anticipate that the fiscal deficit must be financed eventually by money creation.
And though proposed application procedures - both the bifurcated approach in the United States and the trifurcated approach in other countries - by and large maintain that objective, they may have the unintended consequence of distorting domestic competitive equity.