Currencies Come and Go, but Employment Always Takes Root: Rethinking External Constraints and Monetary Sovereignty in the Periphery

This paper explores a development strategy for peripheral economies by advocating for a paradigm shift from traditional economic models that rely on accumulating foreign reserves. It proposes the job guarantee policy, an automatic stabilizer based on a reserve pool of employed individuals, as a cornerstone for fostering sustainable and inclusive growth. Grounded in Modern Money Theory (MMT), this study critiques the conventional approach that prioritizes external reserves and highlights the potential of MMT in offering a more autonomous development path for developing countries. A systematic review of the literature, using the PRISMA methodology, reveals significant disagreement between MMT advocates and critics, particularly regarding monetary sovereignty and the feasibility of implementing macroeconomic policies in peripheral economies. The study emphasizes that, while external constraints remain, the MMT perspective calls for flexible exchange rates (or, at least, discretionary intervention) and low interest rates as part of a broader strategy to reduce dependency on foreign currencies. The proposed approach prioritizes full employment, the mobilization of domestic resources, and structural transformation through policies like import substitution. It offers a more equitable and stable development path. Ultimately, this analysis underscores the potential of MMT-informed policies to enable sustainable development, despite challenges in implementation and political resistance.