The liquidity preference theory: a critical analysis
Giancarlo Bertocco and
Andrea Kalajzic
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Andrea Kalajzic: Department of Economics, University of Insubria, Italy
Economics and Quantitative Methods from Department of Economics, University of Insubria
Abstract:
Keynes in the General Theory, explains the monetary nature of the interest rate by means of the liquidity preference theory. The objective of this paper is twofold. First, to point out the limits of the liquidity preference theory. Second, to present an explanation of the monetary nature of the interest rate based on the arguments with which Keynes responded to the criticism levelled at the liquidity preference theory by supporters of the loanable funds theory such as Ohlin and Robertson. It is shown that this explanation is consistent with the definition of the non-neutrality of money that Keynes presented in his 1933 works in which he underlines the need to elaborate a monetary theory of production in order to explain the phenomena of the crisis and the fluctuations in income and employment.
Pages: 26 pages
Date: 2014-01
New Economics Papers: this item is included in nep-his, nep-hpe, nep-mac, nep-mon and nep-pke
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Persistent link: https://EconPapers.repec.org/RePEc:ins:quaeco:qf1402
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