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Debt, Deficits, and MMT

Summary:
One of the American Economic Association sessions in this year’s ASSA Meetings focused on “Modern Monetary Theory” (MMT) and (maybe somewhat unfairly in the same session) on last year’s presidential address by Olivier Blanchard, which suggested that persistently low interest rates on public debt render government budget constraints non-binding. Greg Mankiw concluded in his paper that “MMT contains some kernels of truth, but its most novel policy prescriptions do not follow cogently from its premises,” in line with my own assessment. Papers by Richard Evans, Michael Boskin, Jasmina Hasanhodzic, as well as by Johannes Brumm, Laurence Kotlikoff, and Felix Kubler argued that Blanchard’s conclusions are not robust, for various reasons.

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One of the American Economic Association sessions in this year’s ASSA Meetings focused on “Modern Monetary Theory” (MMT) and (maybe somewhat unfairly in the same session) on last year’s presidential address by Olivier Blanchard, which suggested that persistently low interest rates on public debt render government budget constraints non-binding.

Greg Mankiw concluded in his paper that “MMT contains some kernels of truth, but its most novel policy prescriptions do not follow cogently from its premises,” in line with my own assessment.

Papers by Richard Evans, Michael Boskin, Jasmina Hasanhodzic, as well as by Johannes Brumm, Laurence Kotlikoff, and Felix Kubler argued that Blanchard’s conclusions are not robust, for various reasons.

Dirk Niepelt
Dirk Niepelt is Director of the Study Center Gerzensee and Professor at the University of Bern. A research fellow at the Centre for Economic Policy Research (CEPR, London), CESifo (Munich) research network member and member of the macroeconomic committee of the Verein für Socialpolitik, he served on the board of the Swiss Society of Economics and Statistics and was an invited professor at the University of Lausanne as well as a visiting professor at the Institute for International Economic Studies (IIES) at Stockholm University.

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