Next Article in Journal / Special Issue
Transmission Channels of Central Bank Asset Purchases in the Irish Economy
Previous Article in Journal
An Analysis of the Determinants of Household Consumption Expenditure and Poverty in India
Previous Article in Special Issue
Financial Stability Index for the Financial Sector of Pakistan
Open AccessArticle

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; https://doi.org/10.3390/economies7040097
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
Show Figures

Figure 1

MDPI and ACS Style

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

Show more citation formats Show less citations formats
Note that from the first issue of 2016, MDPI journals use article numbers instead of page numbers. See further details here.

Article Access Map by Country/Region

1
Back to TopTop