President Biden signed a $1.9 trillion COVID relief package (the “American Rescue Plan”) on March 11, 2021. Without a corresponding increase in taxes, this plan has set off alarm bells for those concerned about the expansion of government deficits and debt. Mainstream economists have raised...

This paper examines the fiscal and monetary policy options available to China as a sovereign currency-issuing nation operating in a dollar standard world. We first summarize a number of issues facing China, including the possibility of slower growth, global imbalances, and a number of domestic...

Over the last few decades, real interest rates have trended downward in many countries. The most common explanation is that this reflects depressed demand due to demographic, technological and other real factors such as income inequality. In this paper we explore the claim that these trends may...

With this paper, our objective is to empirically study public debt sustainability by estimating a fiscal reaction function where the primary balance relative to GDP is assumed to be a function of the public debt to GDP ratio of the previous year and of other macroeconomic variables. In...

The coronavirus pandemic triggered strong political action across Europe. Mandatory restrictions to increase social distancing were imposed, commonly known as lockdowns. In some cases, entire countries were virtually locked down for several weeks at a time, contributing to a very severe downturn...

This paper investigates the relevance of the No-Ponzi game condition for public debt (i.e. the public debt growth rate has to be lower than the real interest rate, a necessary assumption for Ricardian equivalence) and of the transversality condition for the GDP growth rate (i.e. the GDP growth...

We use event study regressions to compare the impact of EU monetary versus fiscal policy announcements on government bond spreads of ten euro member countries. Our motivation is to evaluate which of the two players - the ECB or the EU fiscal level - has been more crucial for the stabilization of...

make several claims about the inadequacy and fallacy of modern money theory (MMT) and conclude that MMT is nothing more than a political manifesto; there is no theoretical and empirical foundation beneath it. The present paper addresses this last point by focusing on the fiscal and monetary...

This article considers the current economic situation from the lens of modern money theory (MMT) and expresses a policy response rooted in post-Keynesian theory and empirical data for the US and the euro area. First, MMT supports targeted deficit spending to promote production. Increasing...