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Policy for Full Employment and Price Stability

In: Modern Money Theory

Author

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  • L. Randall Wray

    (University of Missouri-Kansas City)

Abstract

In this chapter we will examine policy that will promote full employment with price stability. Most economists believe that full employment and price stability are inconsistent. Indeed, unemployment is seen as a “tool” to be used to promote price stability. In this chapter we first examine an approach to full employment that is consistent with MMT, that is, with the operation of a sovereign currency. We will argue that it is possible to pursue full employment in a manner that actually enhances price stability. We will conclude the chapter with an examination of high inflation and hyperinflation. Many critiques of MMT argue that if the principles of MMT were followed (in particular those that follow from the functional finance approach of Lerner) the result would be runaway inflation. We will dispel those fears.

Suggested Citation

  • L. Randall Wray, 2012. "Policy for Full Employment and Price Stability," Palgrave Macmillan Books, in: Modern Money Theory, chapter 7, pages 221-260, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-137-26514-2_7
    DOI: 10.1057/9781137265142_7
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    Cited by:

    1. Dimitri B. Papadimitriou & L. Randall Wray, 2021. "Still Flying Blind after All These Years: The Federal Reserve's Continuing Experiments with Unobservables," Economics Public Policy Brief Archive ppb_156, Levy Economics Institute.
    2. Yeva Nersisyan & L. Randall Wray, 2022. "Is It Time for Rate Hikes? The Fed Cannot Engineer a Soft Landing but Risks Stagflation by Trying," Economics Public Policy Brief Archive ppb_157, Levy Economics Institute.
    3. Yeva Nersisyan & L. Randall Wray, 2021. "Can Biden Build Back Better? Yes, If He Abandons Fiscal "Pay Fors"," Economics Public Policy Brief Archive ppb_155, Levy Economics Institute.

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