Modern Money Theory (MMT) in the Tropics: Functional Finance in Developing Countries

Vernengo, Matías; Caldentey, Esteban Pérez

doi:10.1080/05775132.2020.1747729

Cited by 33 publications

(12 citation statements)

References 11 publications

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“…On the other hand, ongoing discussion is about how to create enough fiscal policy space for public support to post-Covid recovery (Cimoli and Kozul Wright, 2022). Both analyses explicitly or implicitly recall to the possible endogeneity of EDE countries' fiscal space to constraints imposed by the foreign sector and EDE countries' positions in the balance of payments (McCombie and Thirlwall, 2002;Neto and Vernengo, 2004;Arestis and Sawyer, 2010;Porcile and Yajima, 2019;Vernengo and Perez Caldentey, 2020). It is even the more so in the present era of financial globalization, i.e., a system in which financial integration and international financial flows can quickly change the space of domestic fiscal policy (Kohler and Stockhammer, 2022a;Hein and Truger, 2012).…”

Section: Financial Integration and Fiscal Policy: A Brief Literature ...mentioning

confidence: 99%

Financial Integration, Productive Development and Fiscal Policy Space in Developing Countries

Botta

Porcile²,

Spinola

et al. 2022

SSRN Journal

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Section: Financial Integration and Fiscal Policy: A Brief Literature ...mentioning

confidence: 99%

Financial Integration, Productive Development and Fiscal Policy Space in Developing Countries

Botta

Porcile²,

Spinola

et al. 2022

SSRN Journal

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“…The second aim is to analyze the main economic interactions between governments and central banks in terms of fiscal and monetary policy coordination, and different alternatives and limitations that EMDEs face to react countercyclically to the COVID-19 pandemic. We show that several possibilities arise according to the institutional regimes surrounding central bank independence and legal restrictions on central bank intervention and on the sensitivity and tolerance of exchange rate fluctuations (Vernengo and P erez Caldentey 2019).…”

Section: Introductionmentioning

confidence: 96%

A Gathering of Storms: The Impact of COVID-19 Pandemic on the Balance of Payments of Emerging Markets and Developing Economies (EMDEs)

Bortz

Michelena

Toledo

2020

International Journal of Political Economy

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The aim of this article is to track the impact of the COVID-19 pandemic crisis on EMDEs focusing on the performance of their Balance of Payments (BOPs). EMDEs are facing simultaneous hits in their BOPs as they try to cope with the domestic impact of the COVID-19 pandemic. Those impacts call for a rethinking of some aspects of the Keynesian Approach to BOPs while strengthening the view of international financial markets as hierarchical and volatile institutions. The external impacts can be summarized in four channels: (i) The unprecedented capital flight which has led to depreciation, scarcity of hard currency, debt problems and rising spreads in domestic currency; (ii) the fall in commodity prices, a major component of the export basket in most EMDEs; (iii) the contraction in global aggregate demand and supply, which together with lower commodity prices lead to reduced export earnings; and (iv) the decrease in remittances, a major supply of hard currency in several EMDEs and Low-Income Countries (LICs). The concomitant impact of these "storms" has limited the capabilities and efficiency of governments to adopt fiscal and monetary stimulus packages and to respond to the sanitary requirements. Government reactions are also clogged by the large weight of the informal sector in EMDEs.

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“…Even though fiat currency has now become the norm and the modern money theory [3], built on its premises is quite widely disseminated [4][5][6], the budgeting operations of the governments continue to use the treasury analogy to run their tax collection and spending functions. They implicitly assume money to be a commodity of value which must first be raised through taxation and stored in the treasury before it can be exchanged for goods and services.…”

Section: Introductionmentioning

confidence: 99%

Taxation of Fiat Money Using Dynamic Control

Saeed

2022

Systems

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The treasury analogy is widely used in most countries in the execution of fiscal policies striving to match taxation with public expenditure while, at the same time, the central banks tinker with interest rates and reserve requirements and conduct open market operations for regulating money supply. This paper investigates the relevance of those policy actions to the ubiquitous use of fiat money tokens which in addition to meeting public expenditure and paying taxes also facilitate transactions in the economy. A parsimonious model of the macroeconomic system subsuming the prevalent fiscal and monetary interventions is developed and experimented with to explore alternative policy levers for funding public expenditure and controlling money supply. A novel dynamic control regimen to regulate taxation and open market operations for controlling inflation is proposed. It is shown that while the public spending can be entirely met through new money creation, taxation and open market operations must be used as inflation control instruments, whereas expenditure instruments can be used to alleviate the regressivity of taxation regimen.

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Modern Money Theory (MMT) in the Tropics: Functional Finance in Developing Countries

Cited by 33 publications

References 11 publications

Financial Integration, Productive Development and Fiscal Policy Space in Developing Countries

Financial Integration, Productive Development and Fiscal Policy Space in Developing Countries

A Gathering of Storms: The Impact of COVID-19 Pandemic on the Balance of Payments of Emerging Markets and Developing Economies (EMDEs)

Taxation of Fiat Money Using Dynamic Control

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