Weaknesses of MMT as a guide to development policy.

This paper critically examines the applicability of Modern Money Theory (MMT) as a framework for development policy in low- and middle-income countries. It argues that MMT misdiagnoses the core development challenge, which centers on structural transformation and capital accumulation rather than aggregate demand insufficiency, and that MMT's policy prescriptions—such as expansive government spending and Employer of Last Resort programs—may be counterproductive outside select advanced economies. Drawing on classical growth models and international macroeconomic literature, the paper highlights the consumption–investment trade-off and external constraints like currency hierarchy, exchange rate volatility, and limited monetary sovereignty that restrict the feasibility of MMT policies in developing countries. The authors conclude that while MMT may offer useful tools for short-run stabilization, it inadequately addresses the long-run structural and supply-side issues critical to economic development.