IDEAS home Printed from https://ideas.repec.org/p/ins/quaeco/qf0904.html
   My bibliography  Save this paper

On Keynes’s criticism of the Loanable Funds Theory

Author

Listed:
  • Giancarlo Bertocco

    (Department of Economics, University of Insubria, Italy)

Abstract

Contemporary monetary theory, by accepting the theses of the Loanable funds theory, distances itself from Keynes, who considered the rate of interest as an exclusively monetary phenomenon, and overlooks the arguments Keynes used, following publication of the General Theory, to respond to the criticism of supporters of the Loanable funds theory such as Ohlin and Robertson. This paper aims to assert that the explicit consideration of the role of banks in financing firms‘ investments connected with the specification of the finance motive does not imply acceptance of the LFT, which holds that the interest rate is a real phenomenon determined by saving decisions, but makes it possible to elaborate a theory of credit alternative to the LFT and a sounder theory of the non neutrality of money than the one based on the liquidity preference theory.

Suggested Citation

  • Giancarlo Bertocco, 2009. "On Keynes’s criticism of the Loanable Funds Theory," Economics and Quantitative Methods qf0904, Department of Economics, University of Insubria.
    • Handle: RePEc:ins:quaeco:qf0904
    as

    Download full text from publisher

    File URL: https://www.eco.uninsubria.it/RePEc/pdf/QF2009_6.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Bindseil, Ulrich, 2004. "Monetary Policy Implementation: Theory, past, and present," OUP Catalogue, Oxford University Press, number 9780199274543.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Marc Lavoie, 2014. "A comment on 'Endogenous money and effective demand': a revolution or a step backwards?," Review of Keynesian Economics, Edward Elgar Publishing, vol. 2(3), pages 321-332, July.
    2. Spahn, Peter, 2024. "Monetärer Keynesianismus: Versuch einer Rekonstruktion von Hajo Rieses "Theorie der Geldwirtschaft"," Hohenheim Discussion Papers in Business, Economics and Social Sciences 02-2024, University of Hohenheim, Faculty of Business, Economics and Social Sciences.
    3. Alberto Botta, 2011. "Fiscal Policy, Eurobonds and Economic Recovery: Some Heterodox Policy Recipes against Financial Instability and Sovereign Debt Crisis," Economics and Quantitative Methods qf1114, Department of Economics, University of Insubria.
    4. Faruk Ülgen, 2015. "From liberal finance inconsistency to relevant systemic regulation : an institutionalist analysis," Post-Print halshs-01166696, HAL.
    5. Spahn, Peter, 2019. "Keynesian capital theory: Declining interest rates and persisting profits," Hohenheim Discussion Papers in Business, Economics and Social Sciences 10-2019, University of Hohenheim, Faculty of Business, Economics and Social Sciences.
    6. Giancarlo Bertocco & Andrea Kalajzić, 2022. "On the monetary nature of savings: a critical analysis of the Loanable Funds Theory," Working Papers PKWP2206, Post Keynesian Economics Society (PKES).
    7. Giancarlo Bertocco & Andrea Kalajzić, 2023. "A critical analysis of the loanable funds theory: some notes on the non-neutrality of money," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 40(1), pages 35-55, April.
    8. Pesenti, Amos, 2015. "The origin of inflation in a domestic bank-based payment system," FSES Working Papers 457, Faculty of Economics and Social Sciences, University of Freiburg/Fribourg Switzerland.
    9. Gloria Dhahabu & Gitonga Doreen & Barasa Eliakim & Moses Kiarie & Ruth Kibaara & Dismas Omimi & Evusa Zablon & Ngeta Jacqueline, 2022. "Effect of Financial Risks on Financial Performance of Tier One Commercial Banks in Kenya," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 6(6), pages 261-270, June.
    10. Kehrwald, Bernie, 2014. "The Excess Demand Theory of Money," MPRA Paper 57603, University Library of Munich, Germany.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Eladio Febrero & Jorge Uxó & Óscar Dejuán, 2015. "The ECB During the Financial Crisis. Not so Unconventional!," Metroeconomica, Wiley Blackwell, vol. 66(4), pages 715-739, November.
    2. Green, Christopher & Bai, Ye & Murinde, Victor & Ngoka, Kethi & Maana, Isaya & Tiriongo, Samuel, 2016. "Overnight interbank markets and the determination of the interbank rate: A selective survey," International Review of Financial Analysis, Elsevier, vol. 44(C), pages 149-161.
    3. Eric Monnet & Miklos Vari, 2023. "A Dilemma between Liquidity Regulation and Monetary Policy: Some History and Theory," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 55(4), pages 915-944, June.
    4. Julien Pinter, 2022. "Monetarist arithmetic at COVID‐19 time: A take on how not to misapply the quantity theory of money," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 51(2), July.
    5. Gersbach, Hans & Böser, Florian, 2020. "Monetary Policy with a Central Bank Digital Currency: The Short and the Long Term," CEPR Discussion Papers 15322, C.E.P.R. Discussion Papers.
    6. Andreas Bley, 2009. "Gut geschlagen: Geldpolitik der EZB in der Finanzmarktkrise," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 78(1), pages 66-82.
    7. Morten L Bech & Cyril Monnet, 2013. "The Impact of Unconventional Monetary Policy on the Overnight Interbank Market," RBA Annual Conference Volume (Discontinued), in: Alexandra Heath & Matthew Lilley & Mark Manning (ed.),Liquidity and Funding Markets, Reserve Bank of Australia.
    8. Vincent Bignon & Marc Flandreau & Stefano Ugolini, 2012. "Bagehot for beginners: the making of lender‐of‐last‐resort operations in the mid‐nineteenth century," Economic History Review, Economic History Society, vol. 65(2), pages 580-608, May.
    9. Walter, Timo, 2019. "Janus Face of Inflation Targeting_Walter_PrePrint," OSF Preprints 9fmhe, Center for Open Science.
    10. Tanweer Akram & Syed Al-Helal Uddin, 2021. "An empirical analysis of long-term Brazilian interest rates," PLOS ONE, Public Library of Science, vol. 16(9), pages 1-20, September.
    11. Tanweer Akram, 2020. "A Simple Model of the Long-Term Interest Rate," Economics Working Paper Archive wp_951, Levy Economics Institute.
    12. Claudio Borio & William Nelson, 2008. "Monetary operations and the financial turmoil," BIS Quarterly Review, Bank for International Settlements, March.
    13. van Eeghen, Piet-Hein, 2021. "Funding money-creating banks: Cash funding, balance sheet funding and the moral hazard of currency elasticity," International Review of Financial Analysis, Elsevier, vol. 76(C).
    14. Stefano Ugolini, 2012. "The origins of foreign exchange policy: the National Bank of Belgium and the quest for monetary independence in the 1850s," European Review of Economic History, European Historical Economics Society, vol. 16(1), pages 51-73, February.
    15. Anne-Marie Rieu-Foucault, 2017. "Point sur la fourniture de liquidié publique," Working Papers hal-04141643, HAL.
    16. Marcel Fratzscher & Philipp König & Claudia Lambert, 2013. "Liquiditätsmanagement des Eurosystems im Zeichen der Krise," DIW Wochenbericht, DIW Berlin, German Institute for Economic Research, vol. 80(44), pages 3-17.
    17. Kyungsoo Kim, Byoung-Ki Kim, Hail Park, 2012. "Interest Rate-oriented Monetary Policy Framework and Financial Procyclicality," Korean Economic Review, Korean Economic Association, vol. 28, pages 161-188.
    18. Levrero, Enrico Sergio & Deleidi, Matteo, 2019. "The causal relationship between short- and long-term interest rates: an empirical assessment of the United States," MPRA Paper 93608, University Library of Munich, Germany.
    19. Matheus R. Grasselli & Alexander Lipton, 2018. "On the Normality of Negative Interest Rates," Papers 1808.07909, arXiv.org.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ins:quaeco:qf0904. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Segreteria Dipartimento (email available below). General contact details of provider: https://edirc.repec.org/data/feinsit.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.