A Neglected Route to Krugman’s Liquidity Trap Revival

Stefano Di Bucchianico

No CSWP43, Centro Sraffa Working Papers from Centro di Ricerche e Documentazione "Piero Sraffa"

Abstract: Krugman’s 1998 seminal model that revived the liquidity trap theory stimulated a debate on its origins in and differences with respect to Keynes and Hicks’s insights. The present paper illustrates and comments on a neglected line of thought innervating Krugman’s model, which hinges on the presence of a negative natural rate of interest. This result is argued to en-sue from theoretical premises analogous to those present in Samuelson’s 1958 article on the overlapping generations model. In turn, Samuelson obtained a negative equilibrium interest rate by opportunely recasting Böhm-Bawerk’s three causes for a positive rate of interest.

Keywords: three causes for a positive rate of interest; liquidity trap; negative natural rate of interest; Krugman; Samuelson (search for similar items in EconPapers)
JEL-codes: B13 B20 B30 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2020-07-27
New Economics Papers: this item is included in nep-hpe and nep-pke
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Persistent link: https://EconPapers.repec.org/RePEc:ris:sraffa:0043

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