Document Type

Honors Paper

Advisor

Edward McKenna

Publication Date

2017

Abstract

The recent period of ultra-low interest rates and chronically inadequate aggregate demand has led to a series of prominent new proposals of nontraditional means of increasing aggregate demand. That same stagnation has allowed for the increasing influence within the field of Modern Money Theory, a theoretical framework derived from historical observations regarding the role of money. I will explore the impact of Modern Money Theory (MMT) on two of the most prominent proposals for increasing aggregate demand, helicopter money and negative interest rates. I will explain why MMT would suggest, not only are these policies either limited in their effectiveness, or redundant; it is a mistake to refer to both as monetary policy. I present MMT’s solution to inadequate aggregate demand, a Job Guarantee program, and explain the inadequacy of strictly monetary solutions in countering low aggregate demand.

Download

Share

COinS
 

The views expressed in this paper are solely those of the author.