Kalecki’s critique of wicksellianism and the miss-specification of negative interest rates

Jan Toporowski
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Jan Toporowski: Faculty of Law & Social Sciences SOAS, University of London

No 295, NBP Working Papers from Narodowy Bank Polski

Abstract: This paper examines the logic of the arguments for negative interest rates. These arise from a Wicksellian theoretical framework that attributes low investment to a ‘natural’ or ‘real’ rate of interest (that is the rate of profit on real investments) that is below the money rate of interest. At near zero money rates of interest the low investment is presumed to be caused by a negative natural rate of interest. The paper outlines Kalecki’s reasons for believing that in fact the rate of profit for the economy as a whole is in general positive and, in any case, the rate of profit is differentiated in the economy by industry and firm. This removes the Wicksellian rationale for negative interest rates.

Keywords: Kalecki; monetary theory; rate of interest (search for similar items in EconPapers)
JEL-codes: E12 E32 E43 E52 (search for similar items in EconPapers)
Pages: 20
Date: 2018
New Economics Papers: this item is included in nep-cba, nep-mac and nep-pke
Note: I am grateful for comments on an earlier draft of this paper from Charles Goodhart, Peter Kriesler, David Laidler, and Zbigniew Polański. Their generosity leaves me with sole responsibility for any errors remaining in this paper.
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Persistent link: https://EconPapers.repec.org/RePEc:nbp:nbpmis:295

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