Money, Debt, and Power
Paper Session
Sunday, Jan. 4, 2026 10:15 AM - 12:15 PM (EST)
- Chair: Nina Eichacker, University of Rhode Island
Debt, IMF Assistance, and Fiscal Space in the Core and Periphery
Abstract
This paper considers the bind that countries face when considering whether to accept IMF assistance, with the likely consequence of facing conditionalities that require those countries to reduce fiscal expenditure, in the face of debt crises that may prompt credit rating agencies to reduce those countries’ credit rating. This paper highlights the clash between metrics integral to the Washington Consensus, which historically prompted a move away from social spending, fiscal largesse, and capital control regulations in favor of restructuring, austerity, and financial market openness, and contrasts these norms with more holistic assessments of economic health, such as Sen’s Capabilities Approach, Daly’s ecological growth accounting, and the gender development index. It examines welfare spending trends in countries that have and have not received IMF assistance, and specifically contrasts trends in spending on education and healthcare in core and peripheral economies before and after the onset of the COVID-19 Crisis, when there was global recognition of the importance of spending on health programs, and mixed forms of debt aid and liquidity provision applied disparately between richer and poorer economies. These concerns are particularly relevant as interest rates have risen in historic core economies, with spillovers for peripheral economies in the form of higher interest rates and greater monetary precarity that are likely to further limit fiscal space for those economies.Make the Euro Great Again: Geopolitics, the Global Monetary Reset, and the Dominant Reserve Currency
Abstract
The second Trump administration has completely overturned the dynamics of the global economic and financial system, with major implications for the status of the dollar as the world’s reserve currency. At the same time, the Trump administration has upended geopolitics in Europe, leading to a sharp reversal in the attitude towards deficit spending across major economies on the continent. This is most pronounced as defense spending is concerned in Europe’s largest economy, Germany. While initial enthusiasm for the euro as a global alternative to the dollar had faded in the midst of the European debt crisis, its fortunes have revived as the dollar’s hegemonic role as a reserve currency has been eroded by the Trump administration. In this context, the prospects for the euro replacing the dollar as the dominant reserve currency are discussed, with particular reference to the role of the Chinese economy in the global trading order, and the need for a global reserve currency that addresses the balance-of-payments constraints that developing countries face. Historical issues for the US dollar and European currencies during the Bretton Woods and pre-euro periods are discussed in the context of the future dominant reserve currency as well.MMT for the Tropics: A Friendly (but Critical) Defense of the MMT Framework for Developing Economies
Abstract
In recent years, the discussion has focused on the applicability of the MMT prescriptionsfor 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.
JEL Classifications
- B5 - Current Heterodox Approaches
- E4 - Money and Interest Rates