Date of Award

Spring 2016


MS in Economic Theory and Policy


L. Randall Wray, Ph.D.


The push for austerity is based on the assumption that money is a neutral medium of exchange, thus government deficits are inflationary. This theory on the role of money is developed through models, which abstract from historical and institutional detail. In this thesis we present an alternative, historically backed view on money, which emphasizes the link between a sovereign state and the power to issue currency. We then show the European Monetary Union was established following problematic theories. The goal is to emphasize how abstract assumptions decide important economic policies that are implemented in the real world. Based on these views predominant in the European Union, austerity and fiscal restraint are championed as best path to attain growth and stability, and imposed throughout the Eurozone. However, in practice the desired results have not been achieved, with countries still struggling to recover from the financial crisis. We analyze the policy decisions made by the Czech Republic (not in the Eurozone) and Slovakia (in the Eurozone) and find that the principles governing the Eurozone affect all European Union members.

Access Control

On-Campus only