IDEAS home Printed from https://ideas.repec.org/p/lev/wrkpap/wp_961.html
   My bibliography  Save this paper

The "Kansas City" Approach to Modern Money Theory

Author

Listed:
  • L. Randall Wray

Abstract

Modern money theory (MMT) synthesizes several traditions from heterodox economics. Its focus is on describing monetary and fiscal operations in nations that issue a sovereign currency. As such, it applies Georg Friedrich Knapp's state money approach (chartalism), also adopted by John Maynard Keynes in his Treatise on Money. MMT emphasizes the difference between a sovereign currency issuer and a sovereign currency user with respect to issues such as fiscal and monetary policy space, ability to make all payments as they come due, credit worthiness, and insolvency. Following A. Mitchell Innes, however, MMT acknowledges some similarities between sovereign and nonsovereign issues of liabilities, and hence integrates a credit theory of money (or, "endogenous money theory," as it is usually termed by post-Keynesians) with state money theory. MMT uses this integration in policy analysis to address issues such as exchange rate regimes, full employment policy, financial and economic stability, and the current challenges facing modern economies: rising inequality, climate change, aging of the population, tendency toward secular stagnation, and uneven development. This paper will focus on the development of the "Kansas City" approach to MMT at the University of Missouri-Kansas City (UMKC) and the Levy Economics Institute of Bard College.

Suggested Citation

  • L. Randall Wray, 2020. "The "Kansas City" Approach to Modern Money Theory," Economics Working Paper Archive wp_961, Levy Economics Institute.
    • Handle: RePEc:lev:wrkpap:wp_961
    as

    Download full text from publisher

    File URL: http://www.levyinstitute.org/pubs/wp_961.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Dudley Dillard, 1980. "A Monetary Theory of Production: Keynes and the Institutionalists," Journal of Economic Issues, Taylor & Francis Journals, vol. 14(2), pages 255-273, June.
    2. Stephanie Bell & L. Randall Wray, "undated". "The War on Poverty After 40 Years: A Minskyan Assessment," Economics Public Policy Brief Archive ppb_78, Levy Economics Institute.
    3. Knapp, Georg Friedrich, 1924. "The State Theory of Money," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number knapp1924.
    4. Zdravka Todorova, 2009. "Money and Households in a Capitalist Economy," Books, Edward Elgar Publishing, number 13178.
    5. L. R. Wray, 1990. "Money and Credit in Capitalist Economies," Books, Edward Elgar Publishing, number 474.
    6. Felipe de Rezende, 2009. "The Nature of Government Finance in Brazil," International Journal of Political Economy, Taylor & Francis Journals, vol. 38(1), pages 81-104.
    7. Wynne Godley & L. Randall Wray, "undated". "Can Goldilocks Survive?," Economics Policy Note Archive 99-4, Levy Economics Institute.
    8. Graziani,Augusto, 2003. "The Monetary Theory of Production," Cambridge Books, Cambridge University Press, number 9780521812115, October.
    9. L. Randall Wray (ed.), 2004. "Credit and State Theories of Money," Books, Edward Elgar Publishing, number 3204.
    10. Brett Fiebiger & Scott Fullwiler & Stephanie Kelton & L. Randall Wray, 2012. "Modern Monetary Theory: A Debate," Working Papers wp279, Political Economy Research Institute, University of Massachusetts at Amherst.
    11. Yeva Nersisyan & Flavia Dantas, 2017. "Rethinking liquidity creation: Banks, shadow banks and the elasticity of finance," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 40(3), pages 279-299, July.
    12. Mathew Forstater, 1999. "Introduction to Symposium on the European Economic and Monetary Union," Eastern Economic Journal, Eastern Economic Association, vol. 25(1), pages 31-34, Winter.
    13. Eric Tymoigne, 2012. "Financial fragility," Chapters, in: Jan Toporowski & Jo Michell (ed.), Handbook of Critical Issues in Finance, chapter 14, pages i-ii, Edward Elgar Publishing.
    14. 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. Lachlan McCall, 2021. "The Deficit Myth: Modern Monetary Theory and the Birth of the People’s Economy," The Economic Record, The Economic Society of Australia, vol. 97(317), pages 321-325, June.
    2. Summa, Ricardo de Figueiredo, 2022. "Alternative uses of functional finance: Lerner, MMT and the Sraffiansh," IPE Working Papers 175/2021, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    3. Françoise Drumetz & Christian Pfister, 2021. "The Meaning of MMT," Working papers 833, Banque de France.

    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. Zdravka Todorova, 2013. "Connecting social provisioning and functional finance in a post-Keynesian–Institutional analysis of the public sector," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 10(1), pages 61-75.
    2. Thomas Cate (ed.), 2012. "Keynes’s General Theory," Books, Edward Elgar Publishing, number 3855.
    3. Jussi Ahokas, 2012. "Geographies of Monetary Economy and the European economic crisis," ERSA conference papers ersa12p437, European Regional Science Association.
    4. L. Randall Wray, 2013. "Is there room for bulls, bears and States in the circuit?," Chapters, in: Louis-Philippe Rochon & Mario Seccareccia (ed.), Monetary Economies of Production, chapter 6, pages 54-70, Edward Elgar Publishing.
    5. L. Randall Wray, 2012. "Keynes after 75 Years: Rethinking Money as a Public Monopoly," Chapters, in: Thomas Cate (ed.), Keynes’s General Theory, chapter 15, Edward Elgar Publishing.
    6. L. Randall Wray, 2011. "Waiting for the Next Crash: The Minskyan Lessons We Failed to Learn," Economics Public Policy Brief Archive ppb_120, Levy Economics Institute.
    7. Phil Armstrong, 2020. "Can Heterodox Economics Make a Difference?," Books, Edward Elgar Publishing, number 19964.
    8. L. Randall Wray, 2014. "From the State Theory of Money to Modern Money Theory: An Alternative to Economic Orthodoxy," Economics Working Paper Archive wp_792, Levy Economics Institute.
    9. Pitrou, Cyril, 2015. "Graph representation of balance sheets: from exogenous to endogenous money," MPRA Paper 63662, University Library of Munich, Germany.
    10. L. Randall Wray, 2012. "Introduction to an Alternative History of Money," Economics Working Paper Archive wp_717, Levy Economics Institute.
    11. L. Randall Wray, 2020. "Sovereign Currency and Non‐Sovereign Budgets: The Modern Money Theory Approach," Public Budgeting & Finance, Wiley Blackwell, vol. 40(3), pages 26-48, September.
    12. L. Randall Wray, 2010. "Money," Economics Working Paper Archive wp_647, Levy Economics Institute.
    13. Scott T. Fullwiler, 2016. "The Debt Ratio and Sustainable Macroeconomic Policy," World Economic Review, World Economics Association, vol. 2016(7), pages 12-42, July.
    14. Summa, Ricardo de Figueiredo, 2022. "Alternative uses of functional finance: Lerner, MMT and the Sraffiansh," IPE Working Papers 175/2021, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    15. Reynold F. Nesiba, 2013. "Do Institutionalists and post-Keynesians share a common approach to Modern Monetary Theory (MMT)?," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 10(1), pages 44-60.
    16. Cyril Pitrou, 2015. "Graph representation of balance sheets: from exogenous to endogenous money," Papers 1504.03895, arXiv.org, revised Jan 2018.
    17. Louis-Philippe Rochon & Sergio Rossi, 2013. "Endogenous money: the evolutionary versus revolutionary views," Review of Keynesian Economics, Edward Elgar Publishing, vol. 1(2), pages 210-229, January.
    18. L. Randall Wray, 2014. "Outside Money: The Advantages of Owning the Magic Porridge Pot," Economics Working Paper Archive wp_821, Levy Economics Institute.
    19. Eric Tymoigne, 2017. "On the Centrality of Redemption: Linking the State and Credit Theories of Money through a Financial Approach to Money," Economics Working Paper Archive wp_890, Levy Economics Institute.
    20. Giuliano Toshiro Yajima, 2021. "The Employer of Last Resort Scheme and the Energy Transition: A Stock-Flow Consistent Analysis," Economics Working Paper Archive wp_995, Levy Economics Institute.

    More about this item

    Keywords

    Modern Money Theory (MMT); Functional Finance; Chartalism; State Theory of Money; Sectoral Balances; Kansas City Approach; Job Guarantee; Sovereign Currency;
    All these keywords.

    JEL classification:

    • B1 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925
    • B2 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925
    • B52 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Historical; Institutional; Evolutionary; Modern Monetary Theory;
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:lev:wrkpap:wp_961. 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: Elizabeth Dunn (email available below). General contact details of provider: http://www.levyinstitute.org .

    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.