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Functional Finance: What, Why, and How?

  • Stephanie Bell

    (University of Missouri at Kansas City)

Registered author(s):

    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.

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    File URL: http://econwpa.repec.org/eps/mac/papers/0004/0004031.pdf
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    Paper provided by EconWPA in its series Macroeconomics with number 0004031.

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    Length: 30 pages
    Date of creation: 11 Oct 2000
    Date of revision:
    Handle: RePEc:wpa:wuwpma:0004031
    Note: Type of Document - Adobe Acrobat PDF; prepared on IBM PC; to print on PostScript; pages: 30; figures: included
    Contact details of provider: Web page: http://econwpa.repec.org

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    1. Smith, B.D. & Villamil, A.P., 1991. "Government Borrowing using Bonds with Randomly Determined Returns : Welfare Improving Randomization in the Context of Deficit Finance," RCER Working Papers 287, University of Rochester - Center for Economic Research (RCER).
    2. 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.
    3. 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.
    4. Blinder, Alan S. & Solow, Robert M., 1973. "Does fiscal policy matter?," Journal of Public Economics, Elsevier, vol. 2(4), pages 319-337.
    5. Mathew Forstater, 1997. "Selective Use of Discretionary Public Employment and Economic Flexibility," Economics Working Paper Archive wp_218, Levy Economics Institute.
    6. Trostel, Philip A., 1993. "The nonequivalence between deficits and distortionary taxation," Journal of Monetary Economics, Elsevier, vol. 31(2), pages 207-227, April.
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