Modern Money Theory as Part of Economics

While Modern Monetary Theory has been created outside of the economics discipline, some of its main ideas have quite prominent forerunners. These shared ancestors include Georg Friedrich Knapp and his “State Theory of Money” from 1905. Today’s theories that are used as intellectual foundations to inform fiscal and monetary policy derive from different origins. This chapter introduces readers to the ideas that rule our current use of fiscal and monetary policy. After describing these theories, they are used to explain the economic performance of the last couple of decades. Other subjects covered include international trade, sectoral balances, and unit labor costs.