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Approaching Modern Monetary Theory with a Taylor Rule

Department of Accounting, Economics and Finance, Paul and Virginia Engler College of Business, West Texas A&M University, Canyon, TX 79016, USA
Author to whom correspondence should be addressed.
Economies 2019, 7(4), 97;
Received: 25 June 2019 / Revised: 15 September 2019 / Accepted: 16 September 2019 / Published: 20 September 2019
(This article belongs to the Special Issue Macroeconomics and Monetary Policy)
Considering the goals of Modern Monetary Theorists, this article examines inflation stabilization and employment maximization through a Taylor Rule for fiscal policy, similar to John Taylor’s foundational examination of the behavior of the Federal Reserve. If it is the role of the federal government to aid in the maintenance of the dual mandate of the Federal Reserve, then their behavior should follow a similar policy of setting an intermediate target of deficits relative to the maximum employment (the “Federal Job Guarantee”) and the inflation target. The paper will compare the historical data with the rule. When the predictions of the Deficit Rule are compared to historical data from 1965, we find that fiscal policy aligns with what the Deficit Rule predicts with two exceptions: the stagflation of the 1970s and the current increases in budget deficits. View Full-Text
Keywords: modern monetary theory; Taylor rule modern monetary theory; Taylor rule
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MDPI and ACS Style

Mattson, R.S.; Pjesky, R. Approaching Modern Monetary Theory with a Taylor Rule. Economies 2019, 7, 97.

AMA Style

Mattson RS, Pjesky R. Approaching Modern Monetary Theory with a Taylor Rule. Economies. 2019; 7(4):97.

Chicago/Turabian Style

Mattson, Ryan S., and Rex Pjesky. 2019. "Approaching Modern Monetary Theory with a Taylor Rule" Economies 7, no. 4: 97.

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