Monetary sovereignty is a spectrum: modern monetary theory and developing countries

Critics of modern monetary theory (MMT) have alleged that its conclusions rely on the “exorbitant privilege” enjoyed by the US in issuing the global reserve currency, and thus do not apply to developing and emerging countries (DECs). MMT proponents deny this but have recently moderated earlier claims with the introduction of the idea of a “spectrum of monetary sovereignty” (Tankus, 2018; Tcherneva, 2016). In this paper, we assess claims made by MMT proponents regarding the application of MMT to the problems faced by DECs. We argue that MMT proposals fall short of providing a basis for effective development policy and that a broader conceptualisation of development strategy is required, one that acknowledges that external constraints are likely to bind over any plausible policy horizon and takes into account the constraints a hierarchical international monetary and financial system creates for DECs. We conclude that while neo-chartalism provides useful insights in considering monetary and legal arrangements, MMT adds little to the well-established heterodox and structuralist development economics literature