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Fiscal effects on reserves and the independence of the Fed

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  • Stephanie Bell
  • L. Randall Wray

Abstract

Modern governments with a floating currency face no inherent financial constraints. Unfortunately, most modern macro-theorists continue to write as if these nations were financially constrained by (1) the magnitude of current tax "revenue" and (2) the private sector's willingness to "finance" (i.e., buy bonds) spending in excess of (1). Such a position badly misrepresents the actual workings of government finance. In this paper, we provide an abbreviated description of the manner in which the U.S. government carries out its fiscal operations in practice, including an analysis of coordination of the activities of the Fed and Treasury.

Suggested Citation

  • Stephanie Bell & L. Randall Wray, 2002. "Fiscal effects on reserves and the independence of the Fed," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 25(2), pages 263-271.
    • Handle: RePEc:mes:postke:v:25:y:2002:i:2:p:263-271
    DOI: 10.1080/01603477.2002.11051356
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    Cited by:

    1. Eric Tymoigne & L. Randall Wray, 2013. "Modern Money Theory 101: A Reply to Critics," Economics Working Paper Archive wp_778, Levy Economics Institute.
    2. L. Randall Wray, 2007. "Endogenous Money: Structuralist and Horizontalist," Economics Working Paper Archive wp_512, Levy Economics Institute.
    3. Jussi Ahokas, 2012. "Geographies of Monetary Economy and the European economic crisis," ERSA conference papers ersa12p437, European Regional Science Association.
    4. Zengping He & Genliang Jia, 2019. "Rethinking China's Local Government Debt in the Frame of Modern Money Theory," Economics Working Paper Archive wp_932, Levy Economics Institute.
    5. Eric Tymoigne, 2014. "Modern Money Theory, and Interrelations Between the Treasury and Central Bank: The Case of the United States," Journal of Economic Issues, Taylor & Francis Journals, vol. 48(3), pages 641-662.
    6. Zengping He & Genliang Jia, 2019. "An Institutional Analysis of China's Reform of their Monetary Policy Framework," Economics Working Paper Archive wp_925, Levy Economics Institute.

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