The ECB as a Dealer of Last Resort from a Modern Monetary Theory Perspective

Dirk Ehnts () and Michael Paetz ()
Additional contact information
Dirk Ehnts: Steinbeis University
Michael Paetz: University of Hamburg

A chapter in Waving the Swedish Flag in Economics, 2025, pp 119-134 from Springer

Abstract: Abstract The Covid-19 pandemic has led to a renewed interest in monetary systems as public deficits and debts shot up. Modern Monetary Theory (MMT) provides a particularly well-suited toolbox for a monetary analysis that relies on a balance sheet approach. We discuss some basic concepts of a modern monetary system from an MMT perspective and analyse the specific institutional arrangements of the European Central Bank (ECB). Using the Wicksellian frameworks of a pure cash and a pure credit economy, we argue that the central bank is the natural “dealer of last resort” (DOLR) for the government, since the government is the natural currency issuer. Consequently, for the Euro Area (EA) to become a stable currency union, the goals of the ECB policy have to be extended. Instead of causing sovereign debt crises by refusing to provide currency to the governments of EA member states, the ECB should rule out the possibility of future debt crises by construction. It is already halfway there.

Keywords: Euro area; Balance sheets; Asset purchase programmes; Monetary policy; B52; E12; E58 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:spshcp:978-3-031-71511-2_6

Ordering information: This item can be ordered from
http://www.springer.com/9783031715112

DOI: 10.1007/978-3-031-71511-2_6

Access Statistics for this chapter

More chapters in Springer Studies in the History of Economic Thought from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().