Keynes, the Liquidity Trap and the Gold Standard: A Possible Application of the Rational Expectations Hypothesis

Mark A Roberts

The Manchester School of Economic & Social Studies, 1995, vol. 63, issue 1, 82-92

Abstract: It is shown that Keynes's analysis of the liquidity trap phenomenon in the General Theory is consistent with the rational expectations hypothesis, where future monetary policy is believed to be constrained by the gold standard system. This interpretation is also consistent with the view, in B. W. Bateman (1987), that Keynes's later methodological position had evolved significantly since his early work, the Treatise on Probability. It appears that Keynes did not think the relative frequency concept of probability, underlying the rational expectations hypothesis, to be inappropriate where the data were structurally stable or 'homogeneous through time.' Copyright 1995 by Blackwell Publishers Ltd and The Victoria University of Manchester

Date: 1995
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Persistent link: https://EconPapers.repec.org/RePEc:bla:manch2:v:63:y:1995:i:1:p:82-92

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