MMP Blog #45 Responses
Comments and responses on the Modern Money Primer Part 45.
Let’s finish up the discussion of Lerner’s functional finance approach addressing two issues: functional finance and developing nations and also the functional finance approach to trade deficits.
A country that floats its exchange rate can enjoy domestic policy independence and free capital flows. A country that pegs its exchange rate must choose to regulate capital flows or must abandon domestic policy independence.
When government deficit spends, some of the claims on government will end up in the hands of foreigners. Does this matter? Yes, according to many.