Tuesday, March 24, 2015

Brian Romanchuk — Primer: Can We Consolidate The Central Government And Central Bank?

One of the strengths of Modern Monetary Theory (MMT) is that it provides a clean analytical framework for the analysis of "modern" economies (economies with a free-floating currency and which controls its central bank). One of the ways in which it does this is to consolidate the central bank with the fiscal side of the central government. Such a consolidation has extremely important effects for understanding government default risk, and is controversial as a result.
It should be noted that this is a somewhat abstract issue, and it was generally not the direct topic of debates. Instead, academic debates revolved around the more concrete implications of this issue. However, since the concept is consolidation is used a lot within MMT, this topic provides a natural starting point for addressing those other debates. However, I keep the discussion here relatively short, as I hope to discuss the more substantive issues elsewhere.....
Bond Economics
Primer: Can We Consolidate The Central Government And Central Bank?
Brian Romanchuk

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