IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/30521.html
   My bibliography  Save this paper

Monetary and fiscal policy should be merged, which in turn changes the role of central banks

Author

Listed:
  • Musgrave, Ralph S.

Abstract

Keeping monetary and fiscal policy separate causes economic distortions, thus the two should be merged. That is, in a recession for example, the government and central bank should simply spend more (and/or collect less tax), and fund the latter from new or “printed” money. Merging monetary and fiscal policy necessitates a different relationship or split of responsibilities as between governments and central banks, but this is not a big problem. Plus the new relationship dispenses with an illogical element in the current typical relationship, namely that both central bank and government influence aggregate demand.

Suggested Citation

  • Musgrave, Ralph S., 2011. "Monetary and fiscal policy should be merged, which in turn changes the role of central banks," MPRA Paper 30521, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:30521
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/30521/1/MPRA_paper_30521.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. David Colander, 2003. "Functional Finance, New Classical Economics and Great-Great Grandsons," Chapters, in: Edward J. Nell & Mathew Forstater (ed.), Reinventing Functional Finance, chapter 2, Edward Elgar Publishing.
    2. Musgrave, Ralph S., 2010. "Government borrowing is pointless where a government issues its own currency," MPRA Paper 20057, University Library of Munich, Germany.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Musgrave, Ralph S., 2011. "Consolidation causes little austerity," MPRA Paper 34295, University Library of Munich, Germany.

    More about this item

    Keywords

    fiscal policy: monetary policy: distortions: Abba Lerner: central banks: national debt: modern monetary theory: functional finance;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:30521. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.