The Empirical and Institutional Limits of Modern Money Theory

Modern Money Theory (MMT) economists acknowledge a number of empirical and institutional limitations on the applicability of MMT to macroeconomic policy. But they have not attempted to explore these empirically nor have they adequately addressed their implications for MMT’s main macroeconomic policy proposals. This paper by PERI researcher Gerald Epstein identifies some of these important limitations, including those stemming from modern international financial markets. Epstein argues that these limits are much more binding on the policy applicability of MMT than many of MMT’s advocates appear to recognize.

>> Read published article in Review of Radical Political Economics
>> Read preprint here

Abstract

Modern Money Theory (MMT) economists acknowledge a number of empirical and institutional limitations on the applicability of MMT to macroeconomic policy, but they have not attempted to explore these empirically nor have they adequately addressed their implications for MMT’s main macroeconomic policy proposals. This paper identifies some of these important limitations, including those stemming from modern international financial markets, and argues that they are much more binding on the policy applicability of MMT than many of MMT’s advocates appear to recognize.

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