Approaching Modern Monetary Theory with a Taylor Rule
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...
| Main Authors: | , |
|---|---|
| Format: | Article |
| Language: | English |
| Published: |
MDPI AG
2019-09-01
|
| Series: | Economies |
| Subjects: | |
| Online Access: | https://www.mdpi.com/2227-7099/7/4/97 |
| _version_ | 1811277973884502016 |
|---|---|
| author | Ryan S. Mattson Rex Pjesky |
| author_facet | Ryan S. Mattson Rex Pjesky |
| author_sort | Ryan S. Mattson |
| collection | DOAJ |
| description | 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. |
| first_indexed | 2024-04-13T00:26:23Z |
| format | Article |
| id | doaj.art-16eed2215b054325825720c9b3084ba9 |
| institution | Directory Open Access Journal |
| issn | 2227-7099 |
| language | English |
| last_indexed | 2024-04-13T00:26:23Z |
| publishDate | 2019-09-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | Economies |
| spelling | doaj.art-16eed2215b054325825720c9b3084ba92022-12-22T03:10:35ZengMDPI AGEconomies2227-70992019-09-01749710.3390/economies7040097economies7040097Approaching Modern Monetary Theory with a Taylor RuleRyan S. Mattson0Rex Pjesky1Department of Accounting, Economics and Finance, Paul and Virginia Engler College of Business, West Texas A&M University, Canyon, TX 79016, USADepartment of Accounting, Economics and Finance, Paul and Virginia Engler College of Business, West Texas A&M University, Canyon, TX 79016, USAConsidering 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.https://www.mdpi.com/2227-7099/7/4/97modern monetary theoryTaylor rule |
| spellingShingle | Ryan S. Mattson Rex Pjesky Approaching Modern Monetary Theory with a Taylor Rule Economies modern monetary theory Taylor rule |
| title | Approaching Modern Monetary Theory with a Taylor Rule |
| title_full | Approaching Modern Monetary Theory with a Taylor Rule |
| title_fullStr | Approaching Modern Monetary Theory with a Taylor Rule |
| title_full_unstemmed | Approaching Modern Monetary Theory with a Taylor Rule |
| title_short | Approaching Modern Monetary Theory with a Taylor Rule |
| title_sort | approaching modern monetary theory with a taylor rule |
| topic | modern monetary theory Taylor rule |
| url | https://www.mdpi.com/2227-7099/7/4/97 |
| work_keys_str_mv | AT ryansmattson approachingmodernmonetarytheorywithataylorrule AT rexpjesky approachingmodernmonetarytheorywithataylorrule |