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The monetary and fiscal nexus of neo-chartalism: A friendly critique


  • Marc Lavoie

    (CEPN - Centre d'Economie de l'Université Paris Nord - UP13 - Université Paris 13 - USPC - Université Sorbonne Paris Cité - CNRS - Centre National de la Recherche Scientifique, University of Ottawa [Ottawa])


A number of post-Keynesian authors, called the neo-chartalists, have argued that the government does not face a budget constraint similar to that of households and that government with sovereign currencies run no risk of default, even with high debt-to-GDP ratio. This stands in contrast to countries in the eurozone, where the central bank does not normally purchase sovereign debt. While these claims now seem to be accepted by some economists, neo-chartalists have also made a number of controversial claims, including that the government spends simply by crediting a private-sector-bank account at the central bank; that the government does need to borrow to deficit-spend; and that taxes do not finance government expenditures. This paper shows that these surprising statements do have some logic, once one assumes the consolidation of the government sector and the central bank into a unique entity, the state. The paper further argues, however, that these paradoxical claims end up being counter-productive since consolidation is counter-factual.

Suggested Citation

  • Marc Lavoie, 2013. "The monetary and fiscal nexus of neo-chartalism: A friendly critique," Post-Print hal-01343744, HAL.
  • Handle: RePEc:hal:journl:hal-01343744
    DOI: 10.2753/JEI0021-3624470101
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    References listed on IDEAS

    1. Thomas I. Palley, 2013. "Gattopardo economics: the crisis and the mainstream response of change that keeps things the same," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 10(2), pages 193-206.
    2. Thomas I. Palley, 1997. "The Academic Jungle: Social Practice and the Survival of Economic Ideas," Review of Radical Political Economics, Union for Radical Political Economics, vol. 29(3), pages 22-33, September.
    3. Frederic S. Lee, 2011. "The Pluralism Debate in Heterodox Economics," Review of Radical Political Economics, Union for Radical Political Economics, vol. 43(4), pages 540-551, December.
    4. Marc Lavoie, 2011. "La enseñanza de Economía post-Keynesiana en un departamento ortodoxo," Revista de Economía Crítica, Asociación de Economía Crítica, vol. 12, pages 180-198.
    5. David Colander, 2001. "An Interview with Paul Davidson," Eastern Economic Journal, Eastern Economic Association, vol. 27(1), pages 85-114, Winter.
    6. Matías Vernengo, 2010. "Conversation or monologue? on advising heterodox economists," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 32(3), pages 389-396, April.
    7. Leonhard Dobusch & Jakob Kapeller, 2012. "A Guide to Paradigmatic Self-Marginalization: Lessons for Post-Keynesian Economists," Review of Political Economy, Taylor & Francis Journals, vol. 24(3), pages 469-487, July.
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    Cited by:

    1. Sergio Cesaratto, 2016. "La financiación inicial y final en el circuito monetario y la teoría de la demanda efectiva," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 18(35), pages 47-78, July-Dece.
    2. Eric Tymoigne & L. Randall Wray, 2013. "Modern Money Theory 101: A Reply to Critics," Economics Working Paper Archive wp_778, Levy Economics Institute.
    3. Hein, Eckhard & Dodig, Nina & Budyldina, Natalia, 2014. "Financial, economic and social systems: French Regulation School, Social Structures of Accumulation and Post-Keynesian approaches compared," IPE Working Papers 34/2014, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    4. Riccardo Bellofiore, 2014. "The Great Recession and the contradictions of contemporary capitalism," Chapters,in: The Great Recession and the Contradictions of Contemporary Capitalism, chapter 1, pages 7-25 Edward Elgar Publishing.
    5. Hein, Eckhard, 2016. "Post-Keynesian macroeconomics since the mid-1990s: Main developments," IPE Working Papers 75/2016, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    6. Eric Tymoigne, 2014. "Modern Money Theory and Interrelations between the Treasury and the Central Bank: The Case of the United States," Economics Working Paper Archive wp_788, Levy Economics Institute.
    7. repec:bla:metroe:v:68:y:2017:i:2:p:228-258 is not listed on IDEAS

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