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Functional Finance: What, Why, and How?

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  • Stephanie Bell

    (University of Missouri at Kansas City)

Abstract

The purpose of this paper is threefold. First, the theory of functional finance, as explicated by its originator, Abba P. Lerner, is put forward. Second, the reader is introduced to the use, standard in money and banking texts, of T-account balance sheet entries. Although no important conclusions will rest solely on the reader's ability to cope with these entries, comfort with their use will ease the exposition. An appendix therefore is provided to assist those not yet exposed to this method of recording balance sheet changes and for those who merely wish to refresh themselves. The third purpose of the paper is to demonstrate the need for policies governed by the principles of functional finance.

Suggested Citation

  • Stephanie Bell, 2000. "Functional Finance: What, Why, and How?," Macroeconomics 0004031, EconWPA.
  • Handle: RePEc:wpa:wuwpma:0004031 Note: Type of Document - Adobe Acrobat PDF; prepared on IBM PC; to print on PostScript; pages: 30; figures: included
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    File URL: http://econwpa.repec.org/eps/mac/papers/0004/0004031.pdf
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    References listed on IDEAS

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    1. Ludvigson, Sydney, 1996. "The macroeconomic effects of government debt in a stochastic growth model," Journal of Monetary Economics, Elsevier, vol. 38(1), pages 25-45, August.
    2. Smith, Bruce D. & Villamil, Anne P., 1998. "Government borrowing using bonds with randomly determined returns: Welfare improving randomization in the context of deficit finance," Journal of Monetary Economics, Elsevier, pages 351-370.
    3. Mathew Forstater, 1997. "Selective Use of Discretionary Public Employment and Economic Flexibility," Economics Working Paper Archive wp_218, Levy Economics Institute.
    4. Trostel, Philip A., 1993. "The nonequivalence between deficits and distortionary taxation," Journal of Monetary Economics, Elsevier, vol. 31(2), pages 207-227, April.
    5. repec:mes:challe:v:39:y:1996:i:5:p:11-17 is not listed on IDEAS
    6. Wynne Godley, 1999. "Seven Unsustainable Processes: Medium-Term Prospects and Policies for the United States and the World," Economics Strategic Analysis Archive 99-10, Levy Economics Institute.
    7. Blinder, Alan S. & Solow, Robert M., 1973. "Does fiscal policy matter?," Journal of Public Economics, Elsevier, pages 319-337.
    Full references (including those not matched with items on IDEAS)

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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Abba Lerner’s flawed ideas on interest rates.
      by Ralph Musgrave in Ralphonomics on 2011-03-29 12:31:00

    More about this item

    JEL classification:

    • E - Macroeconomics and Monetary Economics

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