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Loanable funds, liquidity preference: structure, past and present

Author

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  • Romar Correa

    (University of Mumbai)

Abstract

We appraise the canonical Robertson­Keynes discussion from the structural axis of exogeneity/endogeneity of the interest rate. The interest rate is shown to be an exogenous variable. It is only with Keynes’ contribution of liquidity preference and, specifically, the introduction of the liquidity preference of banks that no more than the possibility of endogenising the interest rate arises. Given the tenuousness of the resolution, we pose the ethical question: should the rate of interest be endogenised? On the other hand, Keynes’ theorem that the rate of interest is a monetary variable is validated. Both money and the rate of interest are codetermined in a capitalist economy.

Suggested Citation

  • Romar Correa, 2009. "Loanable funds, liquidity preference: structure, past and present," The Journal of Philosophical Economics, Bucharest Academy of Economic Studies, The Journal of Philosophical Economics, vol. 3(1), pages 75-89, November.
    • Handle: RePEc:bus:jphile:v:3:y:2009:i:1:p:75-89
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    Cited by:

    1. Romar CORREA, 2017. "Review of Ajit Sinha, A Revolution in Economic Theory: The Economics of Piero Sraffa, Palgrave Macmillan, 2016, x + 244 pages, ISBN 978-3319306155," The Journal of Philosophical Economics, Bucharest Academy of Economic Studies, The Journal of Philosophical Economics, vol. 10(2), pages 125-131, May.

    More about this item

    Keywords

    money; the rate of interest;

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects

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