Weaknesses of MMT as a guide to development policy

Abstract This paper addresses the limitations of Modern Money Theory (MMT) as a guide to development policy. We explore two main questions on this topic: whether policies championed by MMT advocates (i) ought be implemented in low- and middle-income economies (ii) can implemented. In relation first question, we argue that literature mischaracterises essence challenge for economies. Our argument is chief long-run growth faced developing countries concerns structural transformation rather than general aggregate demand insufficiency. use several formal representations consumption–investment trade-off theory, found Harrod–Domar model, Feldman–Mahalanobis model Kalecki’s 1963 illustrate point. Concerning second even if had correct diagnosis principal countries, its policy recommendations would likely counter-productive outside select advanced draw from international economics currency hierarchy exchange rate volatility