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A Reconsideration of Keynes' Finance Motive

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  • PETER SMITH

Abstract

Keynes' finance motive is a much neglected part of monetary theory. This paper reassesses the meaning and importance of the finance motive and examines the distinction between it and the transactions motive. A specification of the demand function for money is proposed that takes account of the finance motive. The advantages of this specification for analytical and empirical purposes are explained. Finally, it is shown that this specification provides a satisfactory theoretical explanation for the evidence on timing between the real and monetary sectors; evidence thought by some to be inconsistent with Keynes' theory of liquidity preference.

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  • Peter Smith, 1979. "A Reconsideration of Keynes' Finance Motive," The Economic Record, The Economic Society of Australia, vol. 55(3), pages 236-242, September.
    • Handle: RePEc:bla:ecorec:v:55:y:1979:i:3:p:236-242
    DOI: 10.1111/j.1475-4932.1979.tb02226.x
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    References listed on IDEAS

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    1. Paul Davidson, 1965. "Keynes'S Finance Motive," Oxford Economic Papers, Oxford University Press, vol. 17(1), pages 47-65.
    2. Milton Friedman, 1961. "The Lag in Effect of Monetary Policy," Journal of Political Economy, University of Chicago Press, vol. 69, pages 447-447.
    3. Paul Davidson, 1978. "Why Money Matters: Lessons from a Half-Century of Monetary Theory," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 1(1), pages 46-70, October.
    4. Davidson, Paul, 1972. "Money and the Real World," Economic Journal, Royal Economic Society, vol. 82(325), pages 101-115, March.
    5. Peter Smith, 1979. "Keynes' Finance Motive: Some Empirical Evidence," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 1(3), pages 55-68, April.
    6. James Tobin, 1970. "Money and Income: Post Hoc Ergo Propter Hoc?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 84(2), pages 301-317.
    7. Friedman, Milton, 1972. "Comments on the Critics," Journal of Political Economy, University of Chicago Press, vol. 80(5), pages 906-950, Sept.-Oct.
    8. Paul Davidson, 1967. "The Importance Of The Demand For Finance," Oxford Economic Papers, Oxford University Press, vol. 19(2), pages 245-252.
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    Cited by:

    1. Lavoie, Marc, 1982. "Les post-keynésiens et la monnaie endogène," L'Actualité Economique, Société Canadienne de Science Economique, vol. 58(1), pages 191-221, janvier-j.

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