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MMT also goes a long way towards explaining 'the business cycle'.

The pure monetary model and the monetary over investment models assume that consumption, business confidence and investment are endogenous elements. From an MMT perspective investment can be an element of fiscal policy as can be control of inflation. So the business cycle would result from improper or imperfect fiscal policy over the life of the cycle.

Schumpeter introduces the effect of innovations as part of the business cycle. Disruptive inventions invite investment and tend towards a boom. But Schumpeter also assumes that the supply  of capital is determined by endogenous factors. Again, from an MMT perspective, investment can be an element of fiscal policy, as can be responses to inflation.

Keynes explanation is more complex but was never taken to the level of policy perscription and does not suggest active fiscal policy intervention to control the business cycle.

In fact all of the discussed explanations assume no fiscal policy intervention. Yet fiscal policy is probably the best way to control the business cycle.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Apr 29th, 2021 at 04:04:51 AM EST

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