Functional Finance and the Debt Ratio

Abstract:     
This post will explore at length (warning!) and in detail (another warning — wonk alert!) the MMT perspective on the debt ratio and fiscal sustainability. While the approach suggests a macroeconomic policy mix and strategies for both fiscal and monetary policies that most neoclassical economists currently believe are unsustainable, ultimately the MMT preference for a significant role for fiscal policy in macroeconomic stabilization is shown to be consistent with traditional neoclassical views on fiscal sustainability.

Number of Pages in PDF File: 22

Keywords: debt ratio, fiscal sustainability, macroeconomic policy, national debt, functional finance

JEL Classification: E40, E43, E52, E58, E61, E62

working papers series