Policy for Full Employment and Price Stability

Abstract

In this chapter we will examine policy that will promote full employment with price stability. Most economists believe that full employment and price stability are inconsistent. Indeed, unemployment is seen as a “tool” to be used to promote price stability. In this chapter we first examine an approach to full employment that is consistent with MMT, that is, with the operation of a sovereign currency. We will argue that it is possible to pursue full employment in a manner that actually enhances price stability. We will conclude the chapter with an examination of high inflation and hyperinflation. Many critiques of MMT argue that if the principles of MMT were followed (in particular those that follow from the functional finance approach of Lerner) the result would be runaway inflation. We will dispel those fears.