IDEAS home Printed from https://ideas.repec.org/a/bla/coecpo/v40y2022i4p568-584.html
   My bibliography  Save this article

On price stability with a job guarantee

Author

Listed:
  • Jackson Mejia
  • Brian C. Albrecht

Abstract

Modern Money Theory (MMT) has risen to prominence in popular policy debates within macroeconomics. MMT economists argue for creating a job guarantee program, which they argue would generate price stability. Using a benchmark model of time consistency supplemented with a job guarantee, we conclude that once policymakers' incentives are considered, the job guarantee does nothing to help stabilize prices. We compare this program to a competing proposal to maintain price stability and full employment, NGDP targeting.

Suggested Citation

  • Jackson Mejia & Brian C. Albrecht, 2022. "On price stability with a job guarantee," Contemporary Economic Policy, Western Economic Association International, vol. 40(4), pages 568-584, October.
    • Handle: RePEc:bla:coecpo:v:40:y:2022:i:4:p:568-584
    DOI: 10.1111/coep.12573
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/coep.12573
    Download Restriction: no
    File URL: https://libkey.io/10.1111/coep.12573?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Mathew Forstater & Warren Mosler, 2005. "The Natural Rate of Interest Is Zero," Journal of Economic Issues, Taylor & Francis Journals, vol. 39(2), pages 535-542, June.
    2. Kenneth Rogoff, 1985. "The Optimal Degree of Commitment to an Intermediate Monetary Target," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 100(4), pages 1169-1189.
    3. McCallum, Bennett T., 1997. "Crucial issues concerning central bank independence," Journal of Monetary Economics, Elsevier, vol. 39(1), pages 99-112, June.
    4. William F. Mitchell & Warren B. Mosler, 2002. "Fiscal policy and the job guarantee," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 5(2), pages 243-259, June.
    5. Yeva Nersisyan & L. Randall Wray, 2019. "How to Pay for the Green New Deal," Economics Working Paper Archive wp_931, Levy Economics Institute.
    6. Warren Mosler, 1997. "Full Employment and Price Stability," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 20(2), pages 167-182, December.
    7. Darrel Cohen & Glenn Follette, 2000. "The automatic fiscal stabilizers: quietly doing their thing," Economic Policy Review, Federal Reserve Bank of New York, issue Apr, pages 35-67.
    8. Barro, Robert J. & Gordon, David B., 1983. "Rules, discretion and reputation in a model of monetary policy," Journal of Monetary Economics, Elsevier, vol. 12(1), pages 101-121.
    9. Bennett T. McCallum, 1987. "The case for rules in the conduct of monetary policy: a concrete example," Economic Review, Federal Reserve Bank of Richmond, vol. 73(Sep), pages 10-18.
    10. Pavlina R. Tcherneva, 2018. "The Job Guarantee: Design, Jobs, and Implementation," Economics Working Paper Archive wp_902, Levy Economics Institute.
    11. Boettke,Peter J. & Salter,Alexander William & Smith,Daniel J., 2021. "Money and the Rule of Law," Cambridge Books, Cambridge University Press, number 9781108790840, September.
    12. Yeva Nersisyan & L. Randall Wray, 2010. "Deficit Hysteria Redux? Why We Should Stop Worrying About U.S. Government Deficits," Economics Public Policy Brief Archive ppb_111, Levy Economics Institute.
    13. Sumner, Scott, 1995. "The Impact of Futures Price Targeting on the Precision and Credibility of Monetary Policy," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(1), pages 89-106, February.
    14. L. Randall Wray, 1997. "Deficits, Inflation, and Monetary Policy," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 19(4), pages 543-571, July.
    15. Alexander W. Salter & Daniel J. Smith, 2017. "What You Don'T Know Can Hurt You: Knowledge Problems In Monetary Policy," Contemporary Economic Policy, Western Economic Association International, vol. 35(3), pages 505-517, July.
    16. Alex Cukierman & Stefan Gerlach, 2003. "The inflation bias revisited: theory and some international evidence," Manchester School, University of Manchester, vol. 71(5), pages 541-565, September.
    17. William Mitchell, 2017. "The Job Guarantee: A Superior Buffer Stock Option for Government Price Stabilisation," Binzagr Institute for Sustainable Prosperity, in: Michael J. Murray & Mathew Forstater (ed.), The Job Guarantee and Modern Money Theory, chapter 0, pages 47-72, Palgrave Macmillan.
    18. Christina D. Romer & David H. Romer, 2010. "The Macroeconomic Effects of Tax Changes: Estimates Based on a New Measure of Fiscal Shocks," American Economic Review, American Economic Association, vol. 100(3), pages 763-801, June.
    19. Hendrickson, Joshua R. & Salter, Alexander W., 2018. "Going beyond monetary constitutions: The congruence of money and finance," The Quarterly Review of Economics and Finance, Elsevier, vol. 69(C), pages 22-28.
    20. Selgin, George & White, Lawrence H, 1999. "A Fiscal Theory of Government's Role in Money," Economic Inquiry, Western Economic Association International, vol. 37(1), pages 154-165, January.
    21. Glasner,David, 2005. "Free Banking and Monetary Reform," Cambridge Books, Cambridge University Press, number 9780521022514, October.
    22. David Beckworth & Joshua R. Hendrickson, 2020. "Nominal GDP Targeting and the Taylor Rule on an Even Playing Field," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 52(1), pages 269-286, February.
    23. Pavlina R. Tcherneva, 2012. "Inflationary and Distributional Effects of Alternative Fiscal Policies: An Augmented Minskyan-Kaleckian Model," Economics Working Paper Archive wp_706, Levy Economics Institute.
    24. Axel Leijonhufvud, 1997. "Models and theories," Journal of Economic Methodology, Taylor & Francis Journals, vol. 4(2), pages 193-198.
    25. Mathew Forstater, 2006. "Green Jobs: Public Service Employment and Environmental Sustainability," Challenge, Taylor & Francis Journals, vol. 49(4), pages 58-72.
    26. L. Randall Wray, 1998. "Zero Unemployment and Stable Prices," Journal of Economic Issues, Taylor & Francis Journals, vol. 32(2), pages 539-545, June.
    27. Olivier Jean Blanchard, 2000. "The automatic fiscal stabilizers: quietly doing their thing - commentary," Economic Policy Review, Federal Reserve Bank of New York, issue Apr, pages 69-74.
    28. Christopher A Hartwell, 2019. "On the impossibility of central bank independence: four decades of time- (and intellectual) inconsistency," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 43(1), pages 61-84.
    29. L. Randall Wray, 2016. "Taxes are for Redemption, Not Spending," World Economic Review, World Economics Association, vol. 2016(7), pages 3-11, July.
    30. Thomas I. Palley, 2015. "Money, Fiscal Policy, and Interest Rates: A Critique of Modern Monetary Theory," Review of Political Economy, Taylor & Francis Journals, vol. 27(1), pages 1-23, January.
    31. Eric Tymoigne & L. Randall Wray, 2015. "Modern Money Theory: A Reply to Palley," Review of Political Economy, Taylor & Francis Journals, vol. 27(1), pages 24-44, January.
    32. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January.
    33. Hendrickson, Joshua R., 2012. "An overhaul of Federal Reserve doctrine: Nominal income and the Great Moderation," Journal of Macroeconomics, Elsevier, vol. 34(2), pages 304-317.
    34. Robert J. Barro & Charles J. Redlick, 2011. "Macroeconomic Effects From Government Purchases and Taxes," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 126(1), pages 51-102.
    35. William F. Mitchell, 1998. "The Buffer Stock Employment Model and the NAIRU: The Path to Full Employment," Journal of Economic Issues, Taylor & Francis Journals, vol. 32(2), pages 547-555, June.
    36. Eliason, Paul & Lutz, Byron, 2018. "Can fiscal rules constrain the size of government? An analysis of the “crown jewel” of tax and expenditure limitations," Journal of Public Economics, Elsevier, vol. 166(C), pages 115-144.
    37. Scott Sumner, 2014. "Nominal GDP Targeting: A Simple Rule to Improve Fed Performance," Cato Journal, Cato Journal, Cato Institute, vol. 34(2), pages 315-337, Spring/Su.
    38. Mark W. Watson, 2014. "Inflation Persistence, the NAIRU, and the Great Recession," American Economic Review, American Economic Association, vol. 104(5), pages 31-36, May.
    39. Alan J. Auerbach & Daniel R. Feenberg, 2000. "The Significance of Federal Taxes as Automatic Stabilizers," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 37-56, Summer.
    40. Bordo Michael D. & Kydland Finn E., 1995. "The Gold Standard As a Rule: An Essay in Exploration," Explorations in Economic History, Elsevier, vol. 32(4), pages 423-464, October.
    41. Eric Tymoigne, 2014. "The Cost of Job Guarantee in the United States," Review of Radical Political Economics, Union for Radical Political Economics, vol. 46(4), pages 517-535, December.
    42. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-491, June.
    43. Stephanie Bell, 2000. "Do Taxes and Bonds Finance Government Spending?," Journal of Economic Issues, Taylor & Francis Journals, vol. 34(3), pages 603-620, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Aleksandr Arsenev & Meryem Gökten & Philipp Heimberger & Andreas Lichtenberger, 2024. "Full Employment: A Survey of Theory, Empirics and Policies," wiiw Working Papers 249, The Vienna Institute for International Economic Studies, wiiw.

    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. Masciandaro, Donato, 2022. "Independence, conservatism, and beyond: Monetary policy, central bank governance and central banker preferences (1981–2021)," Journal of International Money and Finance, Elsevier, vol. 122(C).
    2. Libich Jan, 2011. "Inflation Nutters? Modelling the Flexibility of Inflation Targeting," The B.E. Journal of Macroeconomics, De Gruyter, vol. 11(1), pages 1-36, June.
    3. Persson, Torsten & Tabellini, Guido, 1999. "Political economics and macroeconomic policy," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 22, pages 1397-1482, Elsevier.
    4. repec:rdg:wpaper:em-dp2007-53 is not listed on IDEAS
    5. D. Masciandaro, 2019. "What Bird Is That? Central Banking And Monetary Policy In The Last Forty Years," BAFFI CAREFIN Working Papers 19127, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    6. Donato Masciandaro, 2021. "Central Bank Governance in Monetary Policy Economics (1981-2020)," BAFFI CAREFIN Working Papers 21153, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    7. Mammadov, Fuad, 2014. "Central Bank Credibility and Black Market Exchange Rate Premia: A Panel Time Series Analysis," MPRA Paper 65572, University Library of Munich, Germany.
    8. Jan Libich, 2006. "Inflexibility Of Inflation Targeting Revisited: Modeling The "Anchoring" Effect," CAMA Working Papers 2006-02, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    9. Ftiti, Zied & Aguir, Abdelkader & Smida, Mounir, 2017. "Time-inconsistency and expansionary business cycle theories: What does matter for the central bank independence–inflation relationship?," Economic Modelling, Elsevier, vol. 67(C), pages 215-227.
    10. Crowe, Christopher & Meade, Ellen E., 2008. "Central bank independence and transparency: Evolution and effectiveness," European Journal of Political Economy, Elsevier, vol. 24(4), pages 763-777, December.
    11. Berlemann, Michael & Hilscher, Kai, 2010. "Effective monetary policy conservatism: A comparison of 11 OECD countries," HWWI Research Papers 2-21, Hamburg Institute of International Economics (HWWI).
    12. Berlemann, Michael & Hielscher, Kai, 2009. "Measuring Effective Monetary Policy Conservatism," Working Paper 89/2009, Helmut Schmidt University, Hamburg.
    13. Peter J. Boettke & Alexander W. Salter & Daniel J. Smith, 2018. "Money as meta-rule: Buchanan’s constitutional economics as a foundation for monetary stability," Public Choice, Springer, vol. 176(3), pages 529-555, September.
    14. Jonathan Benchimol & André Fourçans, 2016. "Nominal income versus Taylor-type rules in practice," Working Papers hal-01357870, HAL.
    15. Paolo Surico, 2008. "Measuring the Time Inconsistency of US Monetary Policy," Economica, London School of Economics and Political Science, vol. 75(297), pages 22-38, February.
    16. Joshua D. Angrist & Jörn-Steffen Pischke, 2010. "The Credibility Revolution in Empirical Economics: How Better Research Design Is Taking the Con out of Econometrics," Journal of Economic Perspectives, American Economic Association, vol. 24(2), pages 3-30, Spring.
    17. Ruge-Murcia, Francisco J, 2003. "Inflation Targeting under Asymmetric Preferences," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(5), pages 763-785, October.
    18. Sibert, Anne & Mihov, Ilian, 2002. "Credibility and Flexibility with Monetary Policy Committees," CEPR Discussion Papers 3278, C.E.P.R. Discussion Papers.
    19. Basso, Henrique S., 2009. "Delegation, time inconsistency and sustainable equilibrium," Journal of Economic Dynamics and Control, Elsevier, vol. 33(8), pages 1617-1629, August.
    20. Ben S. Bernanke & Frederic S. Mishkin, 1997. "Inflation Targeting: A New Framework for Monetary Policy?," Journal of Economic Perspectives, American Economic Association, vol. 11(2), pages 97-116, Spring.
    21. Jean-Bernard Chatelain & Kirsten Ralf, 2020. "How macroeconomists lost control of stabilization policy: towards dark ages," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 27(6), pages 938-982, November.

    More about this item

    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:bla:coecpo:v:40:y:2022:i:4:p:568-584. 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: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/weaaaea.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.