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The finance motive, the Keynesian theory of the rate of interest and the investment multiplier

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  • Giovanni Cesaroni

Abstract

Reconstructing the whole debate on the finance motive, this work highlights the importance of Robertson's and Shaw's critical comments on the Keynesian theory of the rate of interest. Saving and liquidity cannot be conceived — as Keynes and the post-Keynesians claim — as separate categories, in that they are functionally related. This doesn't necessarily means that one has to abandon a monetary theory of the rate of interest which is based on the liquidity preferences of banks and wealth-holders (Kaldor, Shackle). Moreover, we point out a difficulty for the functioning of the multiplier that arises when — according to Keynes — the liquidity position of the revolving fund of finance is restored at the end of the circulation period.

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  • Giovanni Cesaroni, 2001. "The finance motive, the Keynesian theory of the rate of interest and the investment multiplier," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 8(1), pages 58-74.
    • Handle: RePEc:taf:eujhet:v:8:y:2001:i:1:p:58-74
    DOI: 10.1080/713765224
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    1. Andrea Terzi, 1986. "The Independence of Finance from Saving: A Flow-of-Funds Interpretation," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 9(2), pages 188-197, December.
    2. Dennis H. Robertson, 1936. "Some Notes on Mr. Keynes' General Theory of Employment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 51(1), pages 168-191.
    3. Bibow, Jorg, 1995. "Some Reflections on Keynes's 'Finance Motive' for the Demand for Money," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 19(5), pages 647-666, October.
    4. Asimakopulos, A, 1983. "Kalecki and Keynes on Finance, Investment and Saving," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 7(3-4), pages 221-233, September.
    5. A. Asimakopulos, 1986. "Finance, Liquidity, Saving, and Investment," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 9(1), pages 79-90, September.
    6. Snippe, Jan, 1985. "Finance, Saving and Investment in Keynes's Economics," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 9(3), pages 257-269, September.
    7. J. A. Kregel, 1986. "A Note on Finance, Liquidity, Saving, and Investment," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 9(1), pages 91-100, September.
    8. Nicholas Kaldor, 1939. "Speculation and Economic Stability," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 7(1), pages 1-27.
    9. Paul Davidson, 1986. "Finance, Funding, Saving, and Investment," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 9(1), pages 101-110, September.
    10. Victoria Chick, 1983. "Macroeconomics after Keynes: A Reconsideration of the General Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262530457, December.
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    Cited by:

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    2. Bellino, Enrico & Nerozzi, Sebastiano, 2013. "Causality and interdependence in Pasinetti's works and in the modern classical approach," MPRA Paper 52179, University Library of Munich, Germany.

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