Long-term Bonds, Capital Gains and Liquidity Preference

Wynne Godley and Marc Lavoie

Chapter 5 in Monetary Economics, 2007, pp 131-169 from Palgrave Macmillan

Abstract: Abstract The definition of wealth in Model PC in Chapter 4 comprised only two assets, money and bills. In this chapter a third asset, long-term government bonds, is introduced and this will provide an opportunity to discuss the notion of liquidity preference — hence the name Model LP — and also to introduce capital gains and losses into the system of accounts. An important feature of the new model will be that an increase in long-term interest rates will have a short-run negative effect on demand.

Keywords: Interest Rate; Central Bank; Disposable Income; Capital Gain; Monetary Authority (search for similar items in EconPapers)
Date: 2007
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-62654-6_5

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DOI: 10.1057/9780230626546_5

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