This paper will argue that since the ratio of government debt to GDP cannot diverge to infinity, fiscal collapse is not possible. Using a basic macroeconomic model in which the interest rate of government bonds is endogenously determined, with overlapping generations model in mind, we show the...

The aim of the paper is to show, using a simple two-period overlapping generations model in which goods are produced solely by labour in a monopolistically competitive industry, that a continuous budget deficit (including the interest payments on government bonds) is necessary to achieve and...

One of the most commonly used conditions for examining fiscal stability is the Domar condition. It compares the interest rate with the economic growth rate under balanced budget (excluding interest payments), and if the former is greater than the latter, public finances will become unstable, and...

It is said that public finance must be balanced at least in the long run. According to the so-called MMT (Modern Money Theory or Modern Monetary Theory) approach, however, this is not true. It is often pointed out that MMT lacks the mathematical analysis used in ordinary economic discussions....

This paper will examine the relationship between budget deficit, inflation rate and debt to GDP ratio from the perspective of Functional Finance Theory and MMT (Modern Monetary Theory). Using a basic macroeconomic model in which the interest rate of government bonds is endogenously determined,...

This paper examines the relationship among budget deficit, inflation rate and debt to GDP ratio from the perspective of Functional Finance Theory and MMT (Modern Monetary Theory). Using an overlapping generations model under monopolistic competition with bequest motive of consumers, mainly we...

In this note we examine the debt to GDP ratio from the perspective of MMT (Modern Monetary Theory) by a simple macroeconomic model with savings by government bonds instead of money. Mainly we will show the following results. 1) In order to maintain full employment under economic growth, the...

Recently, a school of thought called Modern Monetary Theory (MMT) has been attractingattention, but it has not received much theoretical or mathematical analysis. In this paper, weexamine the theoretical validity of the MMT argument using an overlapping generations(OLG) model that includes...

In this note we examine MMT (Modern Monetary Theory) arguments by a simple macroeconomic model without microeconomic foundations. Mainly we will show the following results. 1) In the underemployment case the national income is determined by the budget deficit. 2) In the full employment case we...

In his "The World’s smallest macroeconomic model” (Krugman(1999)), Paul Krugman argued that under the assumption of price rigidity, a shortage of money supply leads to underemployment or recession, so increasing money supply can eliminate underemployment and restore full employment. But, how...