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Modern Money Theory in the Tropics: A Reply to Agustin Mario

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  • Matías Vernengo
  • Esteban Pérez Caldentey

Abstract

This paper responds to some inaccuracies on the discussion of our views on Modern Money Theory (MMT), as discussed by Agustin Mario. We believe that while is correct in noting that autonomous spending generates taxes, and fiscal balances are a result, MMT authors overlook the difficulties in pursuing expansionary fiscal policy in the developing countries. These are constrained by the existence of an external constraint that cannot be solved with a flexible exchange rate policy regime. Foreign reserves and capital controls are needed.

Suggested Citation

  • Matías Vernengo & Esteban Pérez Caldentey, 2022. "Modern Money Theory in the Tropics: A Reply to Agustin Mario," Challenge, Taylor & Francis Journals, vol. 65(3-4), pages 125-128, July.
    • Handle: RePEc:mes:challe:v:65:y:2022:i:3-4:p:125-128
    DOI: 10.1080/05775132.2022.2090751
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