When the interest rate on the national debt Is a policy variable (and “printing money” does not apply) Scott Fullwiler
By: Fullwiler, Scott T
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Material type: 
ArticlePublisher: 2020Subject(s): DEUDA PUBLICA | INTERES | TIPOS | DEFICIT PUBLICO | HACIENDA PUBLICA | POLITICA MONETARIA | TEORIA ECONOMICA
In:
Public Budgeting and Finance v. 40, n. 3, Fall 2020, p. 72-94Summary: Modern Monetary Theory (MMT) argues that the interest rate on the national debt for a monetary sovereign is a policy variable, not subject to whether bond markets “accept” or “reject” it. This paper defines measures of the components of the standard analysis of fiscal sustainability. It then methodically describes the Federal Reserve's operations relevant for understanding why interest rates on government debt in the United States have been and continue to be driven by monetary policy. A corollary that emerges—“printing money,” as economists usually understand it—is not applicable and has never been advocated by MMT.
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Modern Monetary Theory (MMT) argues that the interest rate on the national debt for a monetary sovereign is a policy variable, not subject to whether bond markets “accept” or “reject” it. This paper defines measures of the components of the standard analysis of fiscal sustainability. It then methodically describes the Federal Reserve's operations relevant for understanding why interest rates on government debt in the United States have been and continue to be driven by monetary policy. A corollary that emerges—“printing money,” as economists usually understand it—is not applicable and has never been advocated by MMT.
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