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Hicks's Theory of the Short-Term Rate of Interest and Thornton and Hawtrey's Influences

Author

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  • Lucy Brillant

    (LEDi - Laboratoire d'Economie de Dijon - UB - Université de Bourgogne - CNRS - Centre National de la Recherche Scientifique)

Abstract

John Richard Hicks offered an endogenous theory of money from the sixties to his last book "A Market Theory of Money" (1989). He develops a theory of credit, and a theory of short-term rates of interest that he had neglected in his previous writings like "Mr Keynes and the Classics" (1937). In this early article, Hicks put the emphasis on the market for cash balance and the motives for the demand for money, while leaving aside the money market and the clearing functions of banks. In the sixties, Hicks was largely inspired by Henry Thornton (1802) and Ralph George Hawtrey (1913, 1919). The originality of this paper is that we interpret the short-term rates as the price of liquidity. This enables to interpret Hicks's analysis of the floor of the short-term rates of interest, and to shed light on his vision of the role of the central bank. Hicks's interest in Thornton's and Hawtrey's theories grew in the sixties, when Milton Friedman was advocating a monetary rule (1965). Hicks thought that Thornton's monetary ideas could "help out the field" (Hicks, 1967).

Suggested Citation

  • Lucy Brillant, 2019. "Hicks's Theory of the Short-Term Rate of Interest and Thornton and Hawtrey's Influences," Post-Print hal-01794570, HAL.
    • Handle: RePEc:hal:journl:hal-01794570
    DOI: 10.1017/S1053837218000482
    Note: View the original document on HAL open archive server: https://hal.science/hal-01794570
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    References listed on IDEAS

    as
    1. Hicks, John, 2017. "A Market Theory of Money," OUP Catalogue, Oxford University Press, number 9780198796237.
    2. David LAIDLER, 2003. "Two Views Of The Lender Of Last Resort: Thornton And Bagehot," Cahiers d’économie politique / Papers in Political Economy, L'Harmattan, issue 45, pages 61-78.
    3. Laidler,David, 1999. "Fabricating the Keynesian Revolution," Cambridge Books, Cambridge University Press, number 9780521641739, October.
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