While traditional macroeconomic views hold that prohibiting central bank financing of government deficits is crucial to preventing inflation and fiscal dominance, modern analyses suggest that such monetization mechanisms do not inherently trigger hyperinflation under current central bank operating procedures.
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The claim addresses whether prohibiting direct central bank financing of deficits prevents hyperinflation and fiscal dominance. Papers such as [0] and [3] link fiscal deficits and debt to inflationary pressures, aligning with traditional concerns about monetary financing. Conversely, papers like [2], [7], and [8] challenge the orthodox view by arguing that modern monetary policy frameworks (such as corridor interest rate systems and quantitative easing) render debt monetization far less dangerous or inflationary than critics claim. Because there is active scholarly disagreement and nuance regarding the actual mechanics and risks of deficit monetization, the balance is best judged as CONTESTED.