Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/309171 
Year of Publication: 
2024
Series/Report no.: 
Working Paper No. 1064
Publisher: 
Levy Economics Institute of Bard College, Annandale-on-Hudson, NY
Abstract: 
This paper evaluates the relationship between monetary and fiscal policy and the relative effectiveness of macroeconomic stabilization through the lens of Modern Money Theory (MMT). We articulate previously-neglected aspects of monetary sovereignty to offer a new interpretation of the Bernanke Doctrine that emerged in the wake of the 2008 Global Financial crisis. This Doctrine validated key MMT precepts and paved the way for fiscal policy activism in response to COVID19. The paper argues that fiscal and monetary policy coordination is not new or rare. It is an intrinsic feature of sovereign monetary regimes, allowing for more effective policy responses to financial crises or pandemics. To the extent that monetary policy is able to stabilize an unstable economy, it is largely due to its fiscal components. This recognition also calls for a rethinking of fiscal policy.
Subjects: 
Modern Money Theory
MMT
Bernanke
Great Financial Crisis
history of money
monetary systems
monetary sovereignty
tax-driven money
consolidated government
government debt and deficit
quantitative easing
fiscal components of monetary policy
nonstandard Open Market Operations
COVID fiscal relief
JEL: 
E12
E58
E61
H62
H63
Document Type: 
Working Paper

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