One criticism of MMT is that it does not have testable predictions. Increasingly it seems as if it does advance two testable (and tested) hypotheses:
1. Cutting interest rates reduces inflation
2. Well-designed government spending increases reduces inflation
1. Cutting interest rates reduces inflation
2. Well-designed government spending increases reduces inflation
You see both of these in the @StephanieKelton piece about Sri Lanka which argues "the most effective anti-inflation tools fall under fiscal policy" & then goes on to cite increased public investment.
It also argues interest rate hikes can raise inflation. stephaniekelton.substack.com
It also argues interest rate hikes can raise inflation. stephaniekelton.substack.com
You see it in the many, many times @wbmosler told Turkey to cut its interest rates to reduce inflation (one place the hypothesis was unfortunately tested).
And you see it in a Twitter exchange I once had with @StephanieKelton.
P.S. You see echoes of the MMT view in conservative non-economist arguments that tax increases will hurt investment/productivity so raise inflation.
Demand not supply is usually the right way to assess the SR impact of monetary/fiscal policy on inflation.
Demand not supply is usually the right way to assess the SR impact of monetary/fiscal policy on inflation.
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