Drumetz/Pfister (2021) make several claims about the inadequacy and fallacy of modern money theory (MMT) conclude that MMT is nothing more than a political manifesto; there no theoretical empirical foundation beneath it. The present paper addresses this last point by focusing on fiscal monetary policy aspects their criticisms. Contrary to what they claim, backed large body evidence, rich instit...

Few individuals are more closely associated with the project of European Economic Monetary Union (EMU) than Jacques Delors.1 As French finance minister between 1981 and 1984, Delors played a decisive role in le tournant de la rigueur, the economic U-turn that saw President François Mitterrand abandon expansionary policies in favour of fiscal consolidation, market reforms, and continued membersh...

In this paper, we analyze the implications of price setting restrictions for the conduct of cyclical fiscal and monetary policy. We consider standard monetary economies that differ in the price setting restrictions imposed on the firms. We show that independently of the degree or type of price stickiness it is possible to implement the same efficient set of allocations, and that each allocation...

Search and matching frictions on financial and labor markets are introduced in a dynamic general equilibrium framework, affecting the dynamics of capital and employment adjustments. While prices are fully flexible and determined by money supply, money demand arises endogenously from financial market matching frictions that prevent some deposits from being channeled into productive investment. T...

Flexible inflation targeting has been advocated as a practical approach to the implementation of an optimal state-contingent monetary policy, but theoretical expositions reaching this conclusion have typically abstracted from the fiscal consequences of monetary policy. Here we extend the standard theory by considering the character of optimal monetary policy under a variety of assumptions about...

decline in inflation in emerging market economies.1 By the end of 2000, average inflation in emerging markets had declined from triple-digit figures in the late 1980s to some 5 percent excluding a few outlier cases—Indonesia, Turkey, and Venezuela (Table 4.1). Such low levels of inflation have not been seen since before World War II, when, mostly under the discipline of the gold standard system...