The Trade-off between Inflation and Unemployment in an MMT World: an Open Economy Perspective

Emilio Carnevali, Matteo Deleidi

Research output: Contribution to journalArticlepeer-review

Abstract

This paper is focused on modern monetary theory’s (MMT) treatment of inflation from an open-economy perspective. It analyses how the inflation process is explained within the MMT framework and provides empirical evidence in support of this vision. However, it also makes use of a stock–flow consistent open-economy model to underline some limits of the theory when it is applied in the context of a non-US (relatively) open economy with a flexible exchange-rate regime. The model challenges the contention made by MMT-ers that measures such as the job guarantee programme can achieve full employment without facing an inflation–unemployment trade-off.
Original languageEnglish
Pages (from-to)1-35
Number of pages35
JournalEuropean Journal of Economics and Economic Policies: Intervention
Early online date1 Apr 2022
DOIs
Publication statusE-pub ahead of print - 1 Apr 2022

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