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Modern Monetary Theory: the post-Crisis economy misunderstood?

Chunping Liu (), A. Patrick Minford and Zhirong Ou

No E2022/13, Cardiff Economics Working Papers from Cardiff University, Cardiff Business School, Economics Section

Abstract: We set out Modern Monetary Theory (MMT) as a full DSGE model, and test it by indirect inference on post Financial Crisis US data, alongside a standard New Keynesian, NK, model. The MMT model is rejected, while the NK model has a high probability. We then evaluate replacing the fiscal and monetary policies within the NK model by MMT policies, and find that they imply a material loss of welfare

Keywords: Modern Monetary Theory; DSGE model; fiscal activism; Wald test; indirect inference (search for similar items in EconPapers)
Pages: 27 pages
Date: 2022-07
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mon and nep-opm
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