Monday, March 25, 2013

Trond Andresen — Improved macroeconomic control with electronic money and modern monetary theory

Abstract 
This paper combines the concept of electronic money (no physical currency) with Modern Monetary Theory (MMT). It argues – based on an MMT understanding of macroeconomics – how electronic monetary systems offer a big step forward for macroeconomic control, among other things by giving a government new and potent steering tools. More specifically the paper discusses how one in an electronic money environment can easily curb an overheated economy primarily through control of money velocity – not money supply. This is a necessary topic to explore, even if the opposite is needed in today's global situation, to convince academics and decision makers that running necessary large and persistent government budget deficits in depressed economies, is not "irresponsible" and does not need to imply strong inflation in later economic boom situations.
Real World Economic Review, no. 63
Improved macroeconomic control with electronic money and modern monetary theory
Trond Andresen | The Norwegian University of Science and Technology

The whole issue of RWER, 63 can be downloaded here.

3 comments:

Neil Wilson said...

Once again the automatic stabilisers have to be strong enough.

You have to have an auto-stabiliser design that will inject sufficient in a slump and trim back hard in a boom.

Preferably without any discretionary intervention.

Discretionary policy then has position the economy such that the auto stabilisers can function effectively.

Anonymous said...

I read the paper in the FB Heterodox group and as far as I could tell it didn't say anything different from MMT.

It spent half the paper outlining what MMT was - which I thought unnecessary and basically said most money today is created electronically.

Yes but so what?

I don't exactly recall but I think it considered all money/currency going electronic but I don't think that will ever happen. Some of us like tactile objects (especially currency) and couldn't do without them.

Roger Erickson said...

@modernmoney

You can always buy some virtual reality gloves, using electronic credit :)