This thesis aims to provide an answer to the question how resilient Modern Monetary Theory is when being critically examined with regards to specific macroeconomic variables. Within each respective variable, MMT´s standpoints and proposals are then compared with fundamental statements of mainstream economic theory representing the contemporary standard. Due to the fact that most literature dealing with MMT takes perspective from an American point of view, the findings of this thesis will generally apply to the scope of the United States and its economy.
In recent years, a small group of like-minded economists who oppose most of the positions conventional economics have established as the contemporary standard has gained a lot of popularity and relevance within the public discourse, especially since the outbreak of the COVID-19 pandemic.
They advocate the so called Modern Monetary Theory which contests the thought that governments which issue their own currency need to worry about taking on too much debt when undertaking fiscal policy measures because they can always create all the funds they require for clearing their debt by themselves. Within the MMT framework, the accumulation of additional government debt is a permanent feature and government expenditures are not limited by any budgetary constraints but only by the consideration of increasing inflation as a consequence of the excessive fiscal policy the theory recommends.
Modern monetarists see an implementation of their theory and its proposals perfectly fit not only for overcoming crises such as the COVID-19 pandemic but also for the initiation of a paradigm shift away from economic theory focused on austerity towards a more human centered approach bringing broad and shared prosperity across all social classes. As this proclaimed paradigm shift is a very ambitious goal and MMT´s proposals bear some powerful promises, a close investigation of the theory and its most fundamental features is required in order to make an assessment on the credibility of these claims.
Inhaltsverzeichnis (Table of Contents)
- 1. INTRODUCTION
- 2. IMPORTANT CORNERSTONES OF MODERN MONETARY THEORY
- 2.1 ORIGINS OF MMT
- 2.1.1 CHARTALISM
- 2.1.2 FUNCTIONAL FINANCE
- 2.1.3 THE KALECKIAN - MODEL
- 2.2 EXPLANATION OF KEY FEATURES
- 2.2.1 CURRENCY ISSUERS VS. CURRENCY USERS
- 2.2.2 THE HOUSEHOLD FALLACY
- 2.2.3 THE FEDERAL JOB GUARANTEE
- 3. OVERVIEW OF THE CURRENT SCIENTIFIC CONTROVERSY
- 4. POLITICAL RELEVANCE
- 5. APPLIED METHOD OF RESEARCH: THE QUALITATIVE CONTENT ANALYSIS
- 5.1 PREPARATION OF DATA
- 5.2 ORGANIZATION OF DATA
- 5.3 REPORTING OF RESULTS
- 6. COMPARISON BETWEEN MMT AND OTHER MACROECONOMIC THEORIES
- 6.1 MONEY
- 6.1.1 PURPOSE OF MONEY
- 6.1.2 SUPPLY OF MONEY
- 6.1.3 DEMAND FOR MONEY
- 6.2 DEBT
- 6.2.1 DOMESTIC CURRENCY DEBT
- 6.2.2 FOREIGN CURRENCY DEBT
- 6.3 INFLATION
- 6.3.1 GENERAL INFLATION
- 6.3.2 HYPERINFLATION
- 6.3.3 STAGFLATION
- 6.4 INTEREST RATES
- 6.4.1 GENERAL INTEREST RATES
- 6.4.2 NATURAL INTEREST RATES
- 6.4.3 CROWDING - OUT
- 6.5 TAXATION
- 6.6 UNEMPLOYMENT
- 6.6.1 CYCLICAL UNEMPLOYMENT
- 6.6.2 NATURAL UNEMPLOYMENT
- 6.6.2.1 FRICTIONAL UNEMPLOYMENT
- 6.6.2.2 STRUCTURAL UNEMPLOYMENT
- 7. CONCLUSION
- 8. CASE STUDY: MMT IN LATIN AMERICA
- 9. OUTLOOK
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This Master's thesis aims to analyze the resilience of Modern Monetary Theory (MMT) by critically comparing its core principles to established macroeconomic theories. The study examines the theoretical foundations of MMT, explores the current scientific debate surrounding it, and analyzes its practical implications. Key themes addressed in this work include:- The origins and key features of MMT, including its theoretical underpinnings in Chartalism, Functional Finance, and the Kaleckian model.
- A critical comparison of MMT's propositions to conventional macroeconomic frameworks, focusing on aspects like money, debt, inflation, interest rates, taxation, and unemployment.
- An assessment of the political relevance and potential implications of adopting MMT policies.
- An exploration of the ongoing scientific controversy surrounding MMT and its critiques from diverse economic perspectives.
- The practical application of MMT principles through a case study focusing on Latin America.
Zusammenfassung der Kapitel (Chapter Summaries)
- Chapter 1: Introduction provides a brief overview of the research topic and its significance. It highlights the increasing relevance of MMT in contemporary economic discussions and outlines the objectives of the thesis.
- Chapter 2: Important Cornerstones of Modern Monetary Theory examines the origins and fundamental tenets of MMT. It explores its theoretical roots in Chartalism, Functional Finance, and the Kaleckian model, and delves into key features such as the distinction between currency issuers and currency users, the "household fallacy," and the concept of a Federal Job Guarantee.
- Chapter 3: Overview of the Current Scientific Controversy analyzes the ongoing debate surrounding MMT, highlighting its strengths, weaknesses, and critiques from diverse economic perspectives. It examines the existing literature and research on MMT, presenting a balanced overview of the current state of knowledge.
- Chapter 4: Political Relevance discusses the political implications of adopting MMT policies. It explores the potential benefits and drawbacks of MMT from a political standpoint, considering its impact on fiscal policy, monetary policy, and government debt management.
- Chapter 5: Applied Method of Research: The Qualitative Content Analysis outlines the methodology employed in the thesis. It describes the data collection and analysis procedures, emphasizing the use of qualitative content analysis to critically evaluate MMT's claims and propositions.
- Chapter 6: Comparison between MMT and Other Macroeconomic Theories constitutes the heart of the research, offering a detailed comparison of MMT's propositions to established macroeconomic theories. This chapter examines MMT's perspectives on money, debt, inflation, interest rates, taxation, and unemployment, contrasting them with conventional economic models.
Schlüsselwörter (Keywords)
The research focuses on Modern Monetary Theory (MMT), examining its origins, core concepts, and critiques. Key themes include Chartalism, Functional Finance, the Kaleckian model, currency issuance, sovereign debt, inflation, interest rates, taxation, unemployment, and the role of government in a modern economy. This study draws on diverse macroeconomic theories and applies qualitative content analysis to critically evaluate MMT's propositions.- Quote paper
- Benedikt Hausmann (Author), 2021, How Resilient is the Modern Monetary Theory? A Scientific Confrontation against Selected Fundamental Statements of Macroeconomic Theories, Munich, GRIN Verlag, https://www.grin.com/document/1135177