IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/107402.html
   My bibliography  Save this paper

A game-theoretic analysis of fiscal policy under economic growth from the perspective of MMT

Author

Listed:
  • Tanaka, Yasuhito

Abstract

We present a game-theoretic analysis of fiscal policy under economic growth from the perspective of MMT using a simple two-periods overlapping generations (OLG) model. We show the following results. 1) Sustained budget deficits are necessary to maintain full-employment under economic growth driven by technological progress. 2) An excessive budget deficit triggers inflation, and after one period inflation full-employment is maintained by sustained budget deficits with constant price. 3) Insufficient government deficit causes involuntary unemployment, and we need extra budget deficit over its steady state value to recover full-employment. These budget deficits need not be, and must not be redeemed. Therefore, if it is institutionally and legally possible, they should be financed by seigniorage not by public debt.

Suggested Citation

  • Tanaka, Yasuhito, 2021. "A game-theoretic analysis of fiscal policy under economic growth from the perspective of MMT," MPRA Paper 107402, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:107402
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/107402/1/MPRA_paper_107402.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Masayuki Otaki, 2015. "Price Theory in a Monetary Economy," Advances in Japanese Business and Economics, in: Keynesian Economics and Price Theory, edition 127, chapter 2, pages 15-41, Springer.
    2. Otaki, Masayuki, 2007. "The dynamically extended Keynesian cross and the welfare-improving fiscal policy," Economics Letters, Elsevier, vol. 96(1), pages 23-29, July.
    3. Otaki, Masayuki, 2009. "A welfare economics foundation for the full-employment policy," Economics Letters, Elsevier, vol. 102(1), pages 1-3, January.
    4. Yasuhito Tanaka, 2020. "Involuntary unemployment with indivisible labor supply under perfect competition," Economics Bulletin, AccessEcon, vol. 40(3), pages 1914-1923.
    Full references (including those not matched with items on IDEAS)

    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. Yasuhito Tanaka, 2021. "An Elementary Mathematical Model for MMT (Modern Monetary Theory)," Research in Applied Economics, Macrothink Institute, vol. 13(3), pages 1-20, September.
    2. Tanaka, Yasuhito, 2022. "Budget deficit in a growing monetary economy: ver. 2," MPRA Paper 115631, University Library of Munich, Germany.
    3. Tanaka, Yasuhito, 2021. "Technical progress and involuntary unemployment under deflation with real balance effect and fiscal policy for full-employment," MPRA Paper 106714, University Library of Munich, Germany.
    4. Yasuhito Tanaka, 2020. "Involuntary unemployment in overlapping generations model due to instability of the economy," Papers 2012.12199, arXiv.org.
    5. Tanaka, Yasuhito, 2021. "Involuntary unemployment in overlapping generations model due to instability of the economy and fiscal policy for full-employment," MPRA Paper 106214, University Library of Munich, Germany.
    6. Tanaka, Yasuhito, 2021. "Budget Deficit to Achieve and Maintain Full-employment Under Growth by Technological Progress," MPRA Paper 107220, University Library of Munich, Germany.
    7. Tanaka, Yasuhito, 2020. "Fiscal policy under involuntary unemployment," MPRA Paper 102507, University Library of Munich, Germany.
    8. Tanaka, Yasuhito, 2021. "Budget deficit for full-employment under growth and inflation by excessive deficit in an OLG model with bequest motive," MPRA Paper 107218, University Library of Munich, Germany.
    9. Tanaka, Yasuhito, 2021. "Mmtの数理モデルについて [A mathematical model of MMT]," MPRA Paper 108425, University Library of Munich, Germany.
    10. Yasuhito Tanaka, 2022. "Debt to GDP Ratio from the Perspective of MMT," Business Management and Strategy, Macrothink Institute, vol. 13(1), pages 1-12, June.
    11. Tanaka, Yasuhito, 2020. "Positive or negative real balance effects, involuntary unemployment, three-generations overlapping generations model," MPRA Paper 104333, University Library of Munich, Germany.
    12. Tanaka, Yasuhito, 2019. "Involuntary unemployment under indivisible labor supply: Perfect competition case," MPRA Paper 97832, University Library of Munich, Germany.
    13. repec:mth:iss888:v:10:y:2022:i:1:p:1-13 is not listed on IDEAS
    14. Yasuhito Tanaka, 2022. "Debt to GDP Ratio from the Perspective of MMT with a Simple Microeconomic Foundation," Journal of Social Science Studies, Macrothink Institute, vol. 9(2), pages 1-1, December.
    15. Tanaka, Yasuhito, 2020. "Involuntary unemployment under monopolistic competition and fiscal policy for full-employment," MPRA Paper 101479, University Library of Munich, Germany.
    16. Yasuhito Tanaka, 2021. "Very Simple Mathematical Model of MMT (Modern Monetary Theory)," Business and Economic Research, Macrothink Institute, vol. 11(3), pages 78-87, December.
    17. Yasuhito Tanaka, 2022. "Debt to GDP Ratio and inflation from the perspective of Functional Finance Theory and MMT," Business and Economic Research, Macrothink Institute, vol. 12(2), pages 84-98, December.
    18. Tanaka Yasuhito, 2020. "Microeconomic Foundation of the Phillips Curve," Studia Universitatis Babeș-Bolyai Oeconomica, Sciendo, vol. 65(3), pages 14-26, December.
    19. Tanaka, Yasuhito, 2021. "Mmtの数学モデルについて [A mathematical model of MMT]," MPRA Paper 109004, University Library of Munich, Germany.
    20. Tanaka Yasuhito, 2022. "Involuntary Unemployment Under Ongoing Nominal Wage Rate Decline in Overlapping Generations Model," Studia Universitatis Babeș-Bolyai Oeconomica, Sciendo, vol. 67(1), pages 11-26, April.
    21. Tanaka, Yasuhito, 2020. "Divisibility and indivisibility of labor supply, and involuntary unemployment: A perfect competition model," MPRA Paper 98405, University Library of Munich, Germany.

    More about this item

    Keywords

    Overlapping generations model; Full-employment; Budget deficit; Growth; MMT;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

    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:pra:mprapa:107402. 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: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    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.