Böhm-Bawerk meets Keynes: What does determine the interest rate, and can the latter become negative?

Ulrich van Suntum

No 65, CAWM Discussion Papers from University of Münster, Münster Center for Economic Policy (MEP)

Abstract: 100 years after Böhm-Bawerks death and nearly 70 years after Keynes has died there is still fundamental controversy about the factors which determine the interest rate in the long run. While Economists in the Austrian tradition see it as solely driven by real phenomena, Keynesian authors mainly stress the monetary factors. Likewise, the current phase of low interest rates is explained in most different ways by prominent economists. While many blame the expansive monetary policy, others point to excess capital supply in ageing industrial states. The present paper seeks to combine these explanations by the use of a stock-flow-consistent macro-model. It is argued that theories in the tradition of Böhm-Bawerk and Keynes respectively do not at all preclude each other but, on the contrary, can nicely be combined.

Keywords: public debt; stock flow consistent model; monetary policy (search for similar items in EconPapers)
JEL-codes: E10 E40 E50 (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-hpe and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cawmdp:65

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