Putting modern monetary theory to the test

Sayuri Shirai asks whether MMT might hold the solution to Japan’s stagnation


Modern monetary theory is suddenly in the spotlight after US congresswoman Alexandria Ocasio-Cortez stressed its importance as a means of boosting public spending for education and medical services earlier this year.1

The basis of MMT is that governments never need default on their own currency-denominated debt and thus spending should be increased to achieve full employment and price stability without worrying about rises in the fiscal deficit and public debt.2 Another feature of MMT is that

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