Abstract
Modern money theory (MMT) describes monetary and fiscal operations in nations that issue a sovereign currency, where the government chooses the money of account and imposes obligations and issues currency in that money of account. This chapter traces the origins and development of MMT, showing that it synthesises several traditions from heterodox economics, including chartalism, endogenous money, financial instability, the sectoral balance approach, and policy to promote full employment. It thus integrates contributions from Knapp, Keynes, Kalecki, Lerner, Minsky, and Godley. MMT uses this integration in policy analysis to address issues such as exchange rate regimes, full employment policy, financial and economic stability, and the diverse current challenges facing modern economies. This chapter focuses particularly on the development of the ‘Kansas City' approach to MMT at the University of Missouri-Kansas City (UMKC) and the Levy Economics Institute of Bard College.
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