M-RCBG Senior Fellow-Led Study Group: Paul Sheard

September 24, 4:00 – 5:30, M-RCBG Conference Room, B-503

Recently, a “heterodox” school of monetary economics known as Modern Monetary Theory, or MMT, has gained attention, and a debate between proponents of MMT and “mainstream” economists has raged in the blogosphere. MMT is most usefully viewed as an alternative lens on the monetary and fiscal system rather than as a competing theory per se. Its main insight is that governments cannot really “run out of money” (in its own economy at least) because they create money when they spend. It might look as if governments have to raise money, by collecting taxes or issuing bonds, in order to spend, but that reflects the institutional design of monetary and fiscal system rather than being intrinsic. 

This Study Group will introduce the basic ideas of MMT, referencing the balance sheet mechanics of monetary and fiscal operations; contrast and compare the MMT and mainstreams narratives; and draw out some of the policy implications of incorporating an MMT lens into contemporary macroeconomic policy debates. The Study Group will draw on Paul Sheard’s more than twenty years of experience as a markets economist in Japan and the US.  

 Background reading:
L. Randall Wray, 2015: Modern Monetary Theory: A Primer on Macroeconomics for Sovereign Monetary Systems (second edition), Palgrave Macmillan 

Paul Sheard, 2013: “Repeat After Me: Banks Cannot and Do Not ‘Lend Out’ Reserves,” Standard & Poor’s Ratings Services RatingsDirect, 15pp

Paul Sheard, 2019: “Central banks have unlimited ammunition – If they chose to use it,” Australian Financial Review, 23 August 

MMT-related blog articles by Scott Fullwiler, Stephanie Kelton, Paul Krugman, Kenneth Rogoff, Lawrence Summers, and Martin Wolf

Study Group handout HERE 

Further Reading:
Paul Sheard 2018: "Rethinking Macroeconomic Policy Frameworks," from The 10 Years After: The End of the Familiar...Reflections on the Great Financial Economic Crisis

Photo of Paul Sheard speakingPaul Sheard is a veteran central bank watcher and markets economist, who has written and spoken widely on QE and unconventional monetary policies. He most recently was Vice Chairman of S&P Global, after serving as Executive Vice President and Chief Economist and earlier Executive Managing Director and Chief Economist of Standard & Poor’s Ratings Services. Previously, he held chief economist positions at Nomura Securities and at Lehman Brothers and was Head of Japan Equity Investments at Baring Asset Management. Earlier, Sheard was Lecturer in Economics at the Australian National University (ANU) and Osaka Gas International Cooperation Associate Professor of Economics at Osaka University, and was Visiting Scholar and Visiting Assistant Professor of Economics at Stanford University and Foreign Visiting Scholar at the Bank of Japan. Sheard is a member of the World Economic Forum’s Global Future Council on the New Economic Agenda (2018-2019) and was a member of the WEF’s Global Agenda Council on the International Monetary System (2010-2012). He served on committees of the Japanese Government’s Economic Deliberation Council, as an appointee of Prime Minister Ryutaro Hashimoto (1997-98) and as an appointee of Prime Minister Keizo Obuchi (1998-1999), and was a member of the oversight board of the Japanese Government’s Research Institute of Economy, Trade and Industry (2001-2006).  From 2003 to 2010, he was a non-executive director of ORIX Corporation. In 2006, Sheard was recognized by Advance as one of a 100 Leading Global Australians. Sheard is on the board of the Foreign Policy Association and is a member of the Bretton Woods Committee, the Council on Foreign Relations, and the Economic Club of New York. He speaks regularly at conferences around the world, and his views on the global economy and policy issues are frequently cited in the international press. Author or editor of four books and numerous academic articles, Sheard’s 1997 book in Japanese, Mein Banku Shihon Shugi no Kiki: Biggu Ban de Kawaru Nihongata Keiei (The Crisis of Main Bank Capitalism: How Japanese-style Management Will Change with “Big Bang”), won the Suntory-Gakugei Prize in the Economics–Politics Division. Sheard received a BA (Hons) from Monash University and a Master of Economics and PhD in Japanese Economy from the ANU. While a Senior Fellow, he will work on a project called, “Rethinking and Retooling the Macroeconomic Policy Framework.” His faculty sponsor is Jason Furman, Professor of the Practice of Economic Policy.  Email: paul_sheard@hks.harvard.edu