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A Mathematical Analysis of a MMT Type Coordinated Fiscal and Monetary Stabilization Policy in a Dynamic Keynesian Model

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Listed:
  • Asada, Toichiro
  • Zimka, Rudolf
  • Demetrian, Michal
  • Zimková, Emília

Abstract

We study the dynamic properties of the coordinated fiscal and monetary stabilization policy in a modern monetary theory (MMT) type macrodynamic model in detail using advanced mathematical techniques and numerical simulations. The dynamic stability, instability of equilibrium points, and questions of qualitative changes at bifurcation points are investigated both mathematically and numerically. Finally, the economic implications of the analysis of this MMT type dynamic model are discussed in contrast to the more orthodox type of Keynesian stabilization policy mix model.

Suggested Citation

  • Asada, Toichiro & Zimka, Rudolf & Demetrian, Michal & Zimková, Emília, 2023. "A Mathematical Analysis of a MMT Type Coordinated Fiscal and Monetary Stabilization Policy in a Dynamic Keynesian Model," Journal of Economic Behavior & Organization, Elsevier, vol. 215(C), pages 442-454.
    • Handle: RePEc:eee:jeborg:v:215:y:2023:i:c:p:442-454
    DOI: 10.1016/j.jebo.2023.09.024
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    References listed on IDEAS

    as
    1. Chiarella,Carl & Flaschel,Peter, 2011. "The Dynamics of Keynesian Monetary Growth," Cambridge Books, Cambridge University Press, number 9780521180184, November.
    2. Yasuhito Tanaka, 2021. "An Elementary Mathematical Model for MMT (Modern Monetary Theory)," Research in Applied Economics, Macrothink Institute, vol. 13(3), pages 1-20, September.
    3. Toichiro Asada & Michal Demetrian & Rudolf Zimka, 2019. "On dynamics in a Keynesian model of monetary and fiscal stabilization policy mix with twin debt accumulation," Metroeconomica, Wiley Blackwell, vol. 70(3), pages 365-383, July.
    4. Asada, Toichiro & Chen, Pu & Chiarella, Carl & Flaschel, Peter, 2006. "Keynesian dynamics and the wage-price spiral: A baseline disequilibrium model," Journal of Macroeconomics, Elsevier, vol. 28(1), pages 90-130, March.
    5. Toichiro Asada & Peter Flaschel & Tarik Mouakil & Christian Proaño, 2011. "Asset Markets, Portfolio Choice and Macroeconomic Activity," Palgrave Macmillan Books, Palgrave Macmillan, number 978-0-230-30777-3, September.
    6. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 195-214, December.
    7. Blinder, Alan S. & Solow, Robert M., 1973. "Does fiscal policy matter?," Journal of Public Economics, Elsevier, vol. 2(4), pages 319-337.
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    More about this item

    Keywords

    Coordinated fiscal and monetary stabilization policy; MMT; dynamic Keynesian model; stability; instability; bifurcation analysis;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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