The Meaning of MMT

Abstract

In the last few years in the U.S. and especially since the publication of Stephanie Kelton’s book, The Deficit Myth (Kelton, 2020) in Europe, the so-called Modern Monetary Theory (MMT) has been gaining prominence in the media and the public. This paper exposes the main proposals of MMT in the light of their doctrinal sources, also confronting them with economic facts and with other currents of economic thought. The first part deals with the approach to money and monetary policy developed by MMT, the second part with its recommendations regarding fiscal policy and aggregate demand management, the third part with the structural policies it advocates, the fourth part with the international aspects of MMT. The fifth part concludes. Overall, it appears that MMT is based on an outdated approach to economics and that the meaning of MMT is a more that of a political manifesto than of a genuine economic theory.

Keywords: Chartalism, Fiscal Policy, Functional Finance, Modern Monetary Theory, Money, Monetary Policy, Structural Policies

JEL Classification: B52, E12, E42, E43, E51, E52, E62, E63, H39, H62, H63, I38, J68, Q58