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MMT: Modern Monetary Theory or Magical Monetary Thinking? The Empirical Evidence

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  • Emilio Ocampo

Abstract

This article presents a summary of the main theoretical arguments and policy recommendations of Modern Monetary Theory (MMT) and traces back its intellectual origins to the writings on money of Georg F. Knapp and on fiscal policy of Abba P. Lerner. It also presents evidence on two countries that followed MMT like policies: Germany between 1939 and 1945 and Argentina with brief interruptions since 1946. The main conclusion of the article is that any country that consistently follows the policy prescriptions of MMT will inevitably experience high inflation and lower (and even negative) economic growth.

Suggested Citation

  • Emilio Ocampo, 2020. "MMT: Modern Monetary Theory or Magical Monetary Thinking? The Empirical Evidence," CEMA Working Papers: Serie Documentos de Trabajo. 762, Universidad del CEMA.
    • Handle: RePEc:cem:doctra:762
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    1. Scitovsky, Tibor, 1984. "Lerner's Contribution to Economics," Journal of Economic Literature, American Economic Association, vol. 22(4), pages 1547-1571, December.
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    Cited by:

    1. Françoise Drumetz & Christian Pfister, 2021. "The Meaning of MMT," Working papers 833, Banque de France.
    2. Françoise Drumetz & Christian Pfister, 2021. "Modern Monetary Theory: A Wrong Compass for Decision-Making," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 56(6), pages 355-361, November.

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    JEL classification:

    • B00 - Schools of Economic Thought and Methodology - - General - - - History of Economic Thought, Methodology, and Heterodox Approaches
    • N14 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: 1913-
    • N16 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Latin America; Caribbean
    • P40 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - General
    • P47 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Performance and Prospects

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