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Modeling Monopoly Money: Government as the Source of the Price Level and Unemployment

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  • Sam Levey

Abstract

Many of the claims put forth by Modern Monetary Theory (MMT) center around the state's monopoly over its own currency. In this paper I interrogate the plausibility of two claims: 1) MMT’s theory of the price level--that the price level is a function of prices paid by government when it spends--and 2) the claim that the cause of deficient effective demand is the state's failure to supply government liabilities so as to meet the demand for net financial assets. I do so by building a model of "monopoly money" capable of producing these two outcomes.

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  • Sam Levey, 2021. "Modeling Monopoly Money: Government as the Source of the Price Level and Unemployment," Economics Working Paper Archive wp_992, Levy Economics Institute.
    • Handle: RePEc:lev:wrkpap:wp_992
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    References listed on IDEAS

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    Cited by:

    1. Dirk Ehnst, 2022. "Modern Monetary Theory: The Right Compass for Decision-Making," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 57(2), pages 128-134, March.

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    More about this item

    Keywords

    Modern Monetary Theory; Price Level; Monopoly Money; Durapoly; Deficient Effective Demand;
    All these keywords.

    JEL classification:

    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • B52 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Historical; Institutional; Evolutionary; Modern Monetary Theory;
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly

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