Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/227900
Authors: 
Aboobaker, Adam
Ugurlu, Esra Nur
Year of Publication: 
2020
Series/Report no.: 
Working Paper No. 2020-09
Abstract: 
This paper addresses the limitations of Modern Money Theory (MMT) as a guide to development policy. We explore two central questions on this topic: whether MMT policies 1) ought to be implemented in low- and middle-income economies and 2) can be implemented. In relation to the first question, we argue that the MMT literature mischaracterizes the essence of the development challenge for low- and middle-income economies. Our argument is that the chief long-run growth challenge faced by developing countries concerns structural transformation rather than general aggregate demand insufficiency. We use several formal representations of the consumption-investment trade-off in growth theory, found in the Harrod-Domar growth model, Kalecki's 1963 growth model, and Feldman-Mahalanobis model, to illustrate this point. Concerning the second question, we argue that even if MMT had the correct diagnosis of the principal growth challenge faced by developing countries, its chief policy recommendations would likely be counter-productive if implemented outside of select advanced economies. We draw from the international economics literature on currency hierarchy and exchange rate volatility to illustrate this point.
Subjects: 
MMT
structural change
macro policy
growth models
history of economic thought
JEL: 
O10
O41
E0
B0
Document Type: 
Working Paper

Files in This Item:
File
Size
273.23 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.