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Impacts of Liquidity Preference on Loan-to-Deposit Ratio and Regional Economic Growth: A Post-Keynesian View

Author

Listed:
  • Wonik Park

    (Gyeonggi Research Institute)

  • Byoungkil Min

    (Chungnam National University)

Abstract

In this study, we analyze the loan-to-deposit ratios (LDRs) and regional economic growth from the perspectives of Post-Keynesian endogenous money theory and liquidity preference theory. We also discover policy implications from the simulation results of a stock-flow consistent model. Contrary to the interpretation of exogenous money theory, we find that a low LDR in a region implies a high level of economic activity. Furthermore,regional economic gaps may emerge through the differences in the liquidity preferences of regions, that is, the liquidity preference differences among regions may lead to differences in various economic behavior, such as willingness to lend, investment propensity, and consumption propensity, which may exacerbate the regional economic gap. Therefore, regional finance should be examined from the perspectives of endogenous money theory and Keynesian theory of liquidity preference.

Suggested Citation

  • Wonik Park & Byoungkil Min, 2021. "Impacts of Liquidity Preference on Loan-to-Deposit Ratio and Regional Economic Growth: A Post-Keynesian View," Korean Economic Review, Korean Economic Association, vol. 37, pages 37-63.
    • Handle: RePEc:kea:keappr:ker-20210101-37-1-02
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    References listed on IDEAS

    as
    1. Eugenio Caverzasi & Antoine Godin, 2015. "Post-Keynesian stock-flow-consistent modelling: a survey," Cambridge Journal of Economics, Oxford University Press, vol. 39(1), pages 157-187.
    2. Marc Lavoie & Wynne Godley, 2012. "Kaleckian Models of Growth in a Coherent Stock–Flow Monetary Framework: A Kaldorian View," Palgrave Macmillan Books, in: Marc Lavoie & Gennaro Zezza (ed.), The Stock-Flow Consistent Approach, chapter 6, pages 123-156, Palgrave Macmillan.
    3. Graziani,Augusto, 2003. "The Monetary Theory of Production," Cambridge Books, Cambridge University Press, number 9780521812115.
    4. Sheila C. Dow, 1993. "Money And The Economic Process," Books, Edward Elgar Publishing, number 147.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Endogenous Money; Liquidity Preference; Stock-Flow Consistent Model; Regional Finance;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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