The government budget is not like a household budget. This report introduces the financial operations used by a central government with a free-floating currency, and explains how they differ from that of a household or corporation. The focus is on what constraints such a government faces, and explains why such governments only face a limited risk of involuntary default.
It introduces a simplified framework for the monetary system, along with the operating procedures that are associated with it. Complications seen in the real world are then added to this framework.
This report also acts as an introduction to some of the concepts used by Modern Monetary Theory, a school of thought within post-Keynesian economics.
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About the Author
Brian received a Ph.D. in Control Systems Engineering from the University of Cambridge, and held post-doctoral positions there and at McGill University. His undergraduate degree was in electrical engineering, from McGill. He is a CFA charter holder.
Brian currently lives in the greater Montréal area.