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The "Modern Monetary Theory": An extension of Radical Political Economy

Esteban Cruz-Hidalgo () and Francisco M. Parejo-Moruno ()
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Esteban Cruz-Hidalgo: Universidad de Extremadura, Spain
Francisco M. Parejo-Moruno: Universidad de Extremadura, Spain

Authors registered in the RePEc Author Service: Francisco Manuel Parejo Moruno () and Esteban Cruz Hidalgo ()

No 1704, Documentos de Trabajo (DT-AEHE) from Asociación Española de Historia Económica

Abstract: The rupture of the nexus between monetary and fiscal policies, which derives from the supranational transfer of the monetary sovereignty by the states, is the origin of the great macroeconomic imbalances that shake today some nations inserted in the European integration process. In this paper we try to show the so-called Modern Monetary Theory, from which underlies the urgency of recovering the monetary-fiscal bond, and consequently, the need of conceiving public finances in a functional way. In contrast to the orthodox recommendations, which suggest fiscal balance and austerity as macroeconomic stabilization measures, the MMT contemplates the government and nongovernmental sectors balances as one, being desirable, therefore, fiscal expansion in recession periods to achieve full employment, without neglecting the one related to price stability. Thus, the implementation of job guaranteed programs would act as a powerful corrector of the supply-side imbalance in the labor market, meanwhile stimulating social and/or environmental improvements in the countries concerned, favoring higher levels of well-being in them ultimately.

Keywords: Money; Modern Monetary Theory; Chartalism; Guarranteed work program; Functional Finance (search for similar items in EconPapers)
JEL-codes: B19 B25 B50 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-hme and nep-pke
Date: 2017-06
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