Modern money theory: some basics in response to Drumetz/Pfister

Joëlle Leclaire
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Joëlle Leclaire: N/A

European Journal of Economics and Economic Policies: Intervention, 2023, vol. 20, issue 1, 34-42

Abstract: This article examines the misconceptions about modern money theory (MMT) put forward by . The author divides her critique into three categories. First, the Drumetz/Pfister article erroneously indicates that MMT focuses exclusively on the means-of-payment function of money, that it considers money as a pure asset, that it does not distinguish between inside and outside money, and that it does not distinguish between money and the monetary base. Second, Drumetz/Pfister (2021) falsely represent MMT as leaving monetary policy to law and as belittling the impact of quantitative easing. Drumetz/Pfister misunderstand what is meant by government debt being monetized. Third, their article puts forward the incorrect idea that increased government spending could lead to increased long-term interest rates, and that a zero interest rate could supposedly bring about macroeconomic instability and inflation.

Keywords: modern money theory; fiscal policy; monetary policy; interest rate; government bonds; money (search for similar items in EconPapers)
JEL-codes: E12 E43 E51 E52 E58 E62 H62 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:elg:ejeepi:v:20:y:2023:i:1:p34-42

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