On the monetary nature of the interest rate in a Keynes–Schumpeter perspective

Giancarlo Bertocco and Andrea Kalajzić

Journal of Post Keynesian Economics, 2019, vol. 42, issue 4, 527-553

Abstract: Keynes, in the General Theory, explains the monetary nature of the interest rate by means of the liquidity preference theory. The objective of this article is twofold. The first objective is to point out the limits of the liquidity preference theory. The fundamental limitation of this theory is that it does not allow to realize the intent declared by Keynes in 1933 to elaborate a monetary theory of production The second objective is to present a more solid theory of the monetary nature of the interest rate. It will be shown that an essential element of this explanation is Schumpeter’s analysis of the role of bank money in a capitalist economy. In fact, this analysis represents a fundamental tool to explain the characteristics that, according to Keynes, distinguish a monetary economy from a real-exchange economy

Date: 2019
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DOI: 10.1080/01603477.2018.1562305

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