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  5. Money, Banking, and Monetary Policy
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Money, Banking, and Monetary Policy

Paper Session

Sunday, Jan. 4, 2026 8:00 AM - 10:00 AM (EST)

Philadelphia Convention Center, 301
Hosted By: Union for Radical Political Economics
  • Chair: Ivan Velasquez, Bucknell University

MMT for the Tropics: A Friendly (but Critical) Defense of the MMT Framework for Developing Economies

Ivan Velasquez
,
Bucknell University

Abstract

In recent years, the discussion has focused on the applicability of the MMT prescriptions
for developing economies. Friendly critiques point out, with reason, the external
restrictions that developing economies face in the current international monetary and
financial system. However, some critics classify prescriptions like the ELR as
macroeconomic populism. Proponents in this vein argue that those associated with
Modern Money Theory are naïve in advocating for the policies defended within this
analytical framework, like the Job Guarantee (or Employer of Last Resort), without
considering that issues such as unemployment and underemployment in these nations
are not due to a lack of effective demand. Instead, they are a consequence of the structure
of their economies. In this paper, I contend that MMT ideas are helpful in rethinking
policies for developing nations and can be part of, or go hand-in-hand with, different
strategies, like the “Leading sector.” I also emphasize that the most significant constraint
for developing economies is related to the international financial system framework, such
as the credit rating agencies, and that the MMT approach is compatible with the economic
structure of developing countries.

Reimagining Monetary Policy: Lessons from Brazil’s Implementation of a CBDC

Fernanda Ultremare
,
Unicamp
Simone Silva de Deos
,
Unicamp

Abstract

This paper undertakes a critical reassessment of the historical evolution and contemporary status of central banks, with a particular focus on the Brazilian central bank (Banco Central do Brasil, BCB) and its impending adoption of a Central Bank Digital Currency (CBDC). By tracing the development of central banks from their origins to modern-day practices and analyzing the current implementation of Brazilian CBDC (Drex), we expose the political underpinnings of the choices for certain monetary designs and policies and its deep entanglement with social power and trust relationships. The advent of CBDCs offers a unique opportunity to bring to light this process as well as to, from a political perspective, reshape these dynamics, potentially democratizing the monetary and payment system through enhanced public engagement and alignment with broader societal objectives. Our analysis challenges the conventional depoliticized and technocratic portrayal of central banks, advocating for a paradigm shift towards a new monetary system and policies that not only aim at financial stability and inflation control but also address pressing societal challenges such as inequality and environmental sustainability, effectively integrating monetary and fiscal measures. We propose a reimagined role for central banks that aligns with democratic governance and public purpose, suggesting that central banks should not only be accountable but also proactively contribute to a just economic transition. This paper aims to contribute to the literature by filling a gap in studies concerning the political dimensions of money and monetary policy and by bringing to light the case of a peripheral country, particularly in light of the emerging technologies that enable the creation of CBDCs. We argue for a multidisciplinary approach to understanding the implications of digital currencies and their capacity to transform central banking.

How Insensitive: The Effect of Monetary Policy on Credit and Income Distribution in Brazil

Joana David Avritzer
,
Connecticut College
Maria Cristina Barbieri Góes
,
Link Campus University, Rome - RM, Italy
Lídia Brochier
,
Federal University of Rio de Janeiro

Abstract

In this paper we investigate the effect of monetary policy shocks on income distribution through
new credit financing, with a particular focus on Brazilian households. More specifically, we
empirically explore the effects of interest rates on the demand for different types of credit
available to individuals - such as consumer credit and mortgage financing - and its consequences
for economic activity and labor market outcomes. We use monthly data for Brazil from 2011 to
2024, available at BACEN (Central Bank of Brazil), and apply SV AR modelling to investigate: i)
the effect of changes in monetary policy on the interest rates that households pay in each type of
credit; ii) the effect of changes in monetary policy on the different types of credit concessions
available to Brazilian households, namely: credit card loans, personal loans, home financing and
credit for the purchase of durable goods, such as vehicles, and iii) the effect of these same
monetary shocks on economic activity, labor market outcomes - such as unemployment,
employed population, wages - and income distribution, namely the wage-share. Finally, in the
case of home financing credit, we also look at the effect of monetary policy on housing and rent
prices. We find that: i) not all types of credit are negatively impacted by a contractionary
monetary policy, as is the case of cheque especial (a type of overdraft credit) and credit cards,
which seem to be much less autonomous than other components of credit; ii) the types of credit
that respond to monetary policy, tend to be negatively affected by it, with also negative effects in terms of labor market outcomes and income distribution, affecting particularly real wages; iii) we also find some evidence of price puzzle in Brazil with higher interest rates having a positiv

The Nature of Money and Its Economic Role: The Lapavitsas-Ingham Controversy Revisited

Alex Palludeto
,
Unicamp
Pedro Quintiliano Paiva
,
Unicamp

Abstract

This work critically evaluates the controversy between Costas Lapavitsas and Geoffrey
Ingham regarding the nature of money and its economic role. Despite their different
theoretical frameworks, both authors challenge the orthodox view of money as a neutral
medium of exchange and relate money to a set of social relations. This paper engages in
a critical dialogue between the authors, focusing on three main issues: the State's role in
money's emergence; the relationship between the categories of measure of value and unit
of account; and the relation of money’s nature with the production and exchange of
commodities. Notwithstanding divergences, the debate presents theoretical elements that
enable a more comprehensive reflection on the contemporary understanding of money,
highlighting the inseparable connection of money with power relations.
JEL Classifications
  • E4 - Money and Interest Rates
  • E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy