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Government monetary and fiscal operations: generalising the endogenous money approach

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  • Eric Tymoigne

Abstract

The traditional endogenous money approach can be generalised substantially by including the insights of Modern Money Theory regarding the necessary coordination of fiscal and monetary policies. A monetarily sovereign government is composed of two entities involved in the issuance and redemption of government monetary instruments. As such, one should include the role of the Treasury in monetary policy and the role of the central bank in fiscal policy. The paper suggests a simple way to model that interaction, shows some of the theoretical insights that can be drawn from that interaction and illustrates the relevance of that interaction with the monetary and fiscal practices of the US Treasury and the Federal Reserve over the past century. Times of stress in the monetary system, such as the recent Great Recession, usually bring to light more forcefully this necessary interaction.

Suggested Citation

  • Eric Tymoigne, 2016. "Government monetary and fiscal operations: generalising the endogenous money approach," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 40(5), pages 1317-1332.
    • Handle: RePEc:oup:cambje:v:40:y:2016:i:5:p:1317-1332.
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    File URL: http://hdl.handle.net/10.1093/cje/bew012
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    Citations

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    Cited by:

    1. Brett Fiebiger, 2016. "Fiscal Policy, Monetary Policy and the Mechanics of Modern Clearing and Settlement Systems," Review of Political Economy, Taylor & Francis Journals, vol. 28(4), pages 590-608, October.
    2. Lachlan McCall, 2021. "The Deficit Myth: Modern Monetary Theory and the Birth of the People’s Economy," The Economic Record, The Economic Society of Australia, vol. 97(317), pages 321-325, June.
    3. Ehnts, Dirk H., 2020. "The fiscal-monetary nexus in Germany," IPE Working Papers 138/2020, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    4. Eduardo Garzón Espinosa & Bibiana Medialdea García & Esteban Cruz Hidalgo, 2021. "Fiscal Policy Approaches: An Inquiring Look From The Modern Monetary Theory," Journal of Economic Issues, Taylor & Francis Journals, vol. 55(4), pages 999-1022, October.
    5. Carolina Alves, 2023. "Fictitious capital, the credit system, and the particular case of government bonds in Marx," New Political Economy, Taylor & Francis Journals, vol. 28(3), pages 398-415, May.
    6. Aloys L. Prinz & Hanno Beck, 2021. "Modern Monetary Theory: A Solid Theoretical Foundation of Economic Policy?," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 49(2), pages 173-186, June.
    7. Shvets, Serhii, 2021. "How excessive endogenous money supply can contribute to global financial crises," MPRA Paper 110191, University Library of Munich, Germany, revised 30 Jul 2021.
    8. Jo Michell, 2023. "Macroeconomic policy at the end of the age of abundance," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 20(2), pages 369-387, November.
    9. Telma Barrantes-Fernández & Esteban Cruz-Hidalgo & José Francisco Rangel-Preciado & Francisco Manuel Parejo-Moruno, 2023. "Decommodify the 2030 Agenda: Why and How to Finance What Is Not Profitable?," Sustainability, MDPI, vol. 15(5), pages 1-16, February.
    10. Esteban Cruz-Hidalgo & Dirk H. Ehnts & Pavlina R. Tcherneva, 2019. "Completing the euro: The euro treasury and the job guarantee," Revista de Economía Crítica, Asociación de Economía Crítica, vol. 27, pages 100-111.
    11. Kiyutsevskaya, Anna (Киюцевская, Анна) & Trunin, Pavel (Трунин, Павел), 2018. "Features of Interest Rate Policy Under the Inflation Targeting Regime [Особенности Процентной Политики При Режиме Таргетирования Инфляции]," Working Papers 031812, Russian Presidential Academy of National Economy and Public Administration.
    12. Jan Kubíček & Pavel Morda, 2023. "Fiskální deficit a emise peněz v České republice v době pandemie covidu-19 [Fiscal Deficit and Money Issuance in Czech Republic during COVID-19 Pandemic]," Politická ekonomie, Prague University of Economics and Business, vol. 2023(1), pages 68-88.

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