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Money, foreign exchange and the balance of payments

In: The Elgar Companion to Modern Money Theory

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  • Michael Hudson

Abstract

Modern Money Theory (MMT) does not explicitly deal with the balance of payments, because it deals with domestic currency, not foreign exchange. However, MMT urges that countries should not rely on foreign creditors for money that is to be spent domestically. Converting foreign currency into domestic money requires the central bank to create the domestic counterpart to its receipt of foreign currency. That raises the question: why borrow at all, if the central bank is going to create domestic money in any case?

Suggested Citation

  • Michael Hudson, 2024. "Money, foreign exchange and the balance of payments," Chapters, in: Yeva Nersisyan & L. R. Wray (ed.), The Elgar Companion to Modern Money Theory, chapter 23, pages 303-312, Edward Elgar Publishing.
    • Handle: RePEc:elg:eechap:18498_23
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    File URL: https://www.elgaronline.com/doi/10.4337/9781788972246.00032
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