Households’ Liquidity Preference, Banks’ Capitalization and the Macroeconomy: A Theoretical Investigation

Marco Missaglia and Alberto Botta

Review of Political Economy, 2024, vol. 36, issue 3, 1192-1215

Abstract: In this paper, we build a simple model on the role of households’ liquidity preference in the determination of economic performance. We postulate, for the sake of the argument, a purely ‘horizontalist’ environment, i.e., a world of endogenous money where the central bank is able to fix the interest rate(s) at a level of its own willing. We show that even in such a framework liquidity preference, while obviously not constituting anymore a theory for the determination of the interest rate, continues to be a key element for the determination of both the level and evolution over time of aggregate income and capital accumulation. In our model, this happens because of the working of a mechanism so far unexplored in the literature, i.e., the endogenous variations of banks’ policy of profits’ distribution in response to changes in the liquidity preference of the public.

Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/09538259.2022.2100218 (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Households’ liquidity preference, banks’ capitalization and the macroeconomy: a theoretical investigation (2022)
Working Paper: Households’ liquidity preference, banks’ capitalization and the macroeconomy: a theoretical investigation (2022)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:revpoe:v:36:y:2024:i:3:p:1192-1215

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/CRPE20

DOI: 10.1080/09538259.2022.2100218

Access Statistics for this article

Review of Political Economy is currently edited by Steve Pressman and Louis-Philippe Rochon

More articles in Review of Political Economy from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().