Reconsideration of MMT-type Fiscal and Monetary Stabilization Policy from a Viewpoint of Dynamic Keynesian Model

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In this paper, the theoretical foundation of Modern Monetary Theory (MMT), which is often considered unconventional within mainstream economics, is used as the basis to examine the macroeconomic stability and instability through a dynamic Keynesian model. A common critique of MMT is the assertion that governments find it challenging to control inflation through fiscal policy. However, this study's findings indicate that by establishing credibility in inflation target and consistently pursuing proactive fiscal policies in response to deficient output gaps, inflation can be managed without escalating uncontrollably, leading to economic stabilization. Although the fundamental tenets of MMT may not heavily emphasize monetary policy, the significance of fiscal policy is reaffirmed by the conclusions drawn from this paper, ensuring that crucial aspects are not disregarded.

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