This paper examines the views of Hyman Minsky and Abba Lerner on the functional finance approach to fiscal policy. It argues that the main principles of functional finance were relatively widely held in the immediate postwar period. However, with the rise of the Phillips curve, the return of the...

Modern Money Theory (MMT) has generated considerable scrutiny and discussions over the past decade. While it has gained some acceptance in the financial sector and among some politicians, it has come under strong criticisms from all sides of the academic spectrum and from conservative political...

The objective of this paper is to provide an optimizing model of wage and price setting consistent with U.S. data. The paper first investigates the predictions of an optimizing labor supply model for the aggregate nominal wage, taking as given the evolution of prices and quantities. In this part...

This paper investigates the predictions of a simple optimizing model of nominal price rigidity for the dynamics of inflation. Taking as given the paths of nominal labor compensation and labor productivity to approximate the evolution of marginal costs, I determine the path of prices predicted by...

It is commonly asserted that inflation is a jump variable in the New Keynesian Phillips curve, and thus wage-price inertia does not imply inflation inertia. We show that this "inflation flexibility proposition" is highly misleading, relying on the assumption that real variables are exogenous. In...

We examine the standard New Keynesian economy's Ramsey problem written in terms of instrument settings instead of allocations. Its standard formulation makes two instruments available: the path of current and future interest rates, and an "open mouth operation" which selects one of the many...

We hope to model financial fragility and money in a way that captures much of what is crucial in Hyman Minsky's financial fragility hypothesis. This approach to modeling Minsky may be unique in the formal Minskyan literature. Namely, we adopt a model in which a psychological variable we call...

We present a model where the saving rate of the household sector, especially households at the bottom of the income distribution, becomes the endogenous variable that adjusts in order for full employment to be maintained over time. An increase in income inequality and the current account deficit...

In historical accounts of the world economic crisis of the 1930s, Switzerland is known for its staunch defense of the gold standard and the rise of corporatist policies. Yet, so far, the literature has not discussed the implications of these two features. This paper tries to show how the...

Many empirical studies have found that interest rate have a positive effect on the price level. This paper pursues an obvious, but neglected explanation: interest payments are a cost of production that is at least in part passed on to costumers. A model shows that the cost-push effect of...