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Alternative Theories of the Rate of Interest

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  • Wray, L Randall

Abstract

This article develops a general framework for the analysis of alternative theories concerning the determination of interest rates. The framework extends Kenneth Boulding's asset approach in which Keynesian liquidity preference theory is interpreted as a theory of asset valuation. A model of asset price determination is used to examine neoclassical, monetarist, portfolio balance, and horizontal theories of interest rates. Finally, the article uses the framework to reconcile liquidity preference theory with an endogenous money approach. It is argued that endogenous money, liquidity preference, and the expenditure multiplier are the three essential and interrelated principles of the Keynesian approach. Copyright 1992 by Oxford University Press.

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Bibliographic Info

Article provided by Oxford University Press in its journal Cambridge Journal of Economics.

Volume (Year): 16 (1992)
Issue (Month): 1 (March)
Pages: 69-89

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Handle: RePEc:oup:cambje:v:16:y:1992:i:1:p:69-89

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Cited by:
  1. Marc Lavoie, 2001. "Endogenous Money in a Coherent Stock-Flow Framework," Macroeconomics 0103007, EconWPA.
  2. Gustavo Junca, 2006. "Modelo De Zonas Objetivo Para La Tasa De Interés De Corto Plazo," REVISTA CUADERNOS DE ECONOMÍA, UN - RCE - CID.
  3. Hein, Eckhard, 1999. "Interest Rates, Income Shares, and Investment in a Kaleckian Model," MPRA Paper 18607, University Library of Munich, Germany.
  4. 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.
  5. L. Randall Wray, 1999. "Government Deficits, Liquidity Preference, and Schumpeterian Innovation," Macroeconomics 9907005, EconWPA.
  6. L. Randall Wray, 1998. "Is Keynesianism Institutionalist?: An Irreverent Overview of the History of Money from the Beginning of the Beginning to the Present," Economics Working Paper Archive wp_257, Levy Economics Institute.
  7. Joerg Bibow, 2005. "Liquidity Preference Theory Revisited—To Ditch or to Build on It?," Method and Hist of Econ Thought 0508003, EconWPA.
  8. Jorg Bibow, 2005. "Liquidity Preference Theory Revisited: To Ditch or to Build on It?," Economics Working Paper Archive wp_427, Levy Economics Institute.
  9. Mika Linden, 1995. "Interest rate and inflation expectations in Finland 1987-1994 : a case for the inverted fisher hypothesis," Finnish Economic Papers, Finnish Economic Association, vol. 8(2), pages 108-115, Autumn.
  10. Hein, Eckhard, 2010. "The rate of interest as a macroeconomic distribution parameter: Horizontalism and Post-Keynesian models of distribution of growth," MPRA Paper 23372, University Library of Munich, Germany.
  11. Antonio Carlos Macedo e Silva, 2006. "Detalhes Extraviados E Ausências Conspícuas: Do Treatise À General Theory," Anais do XXXIV Encontro Nacional de Economia [Proceedings of the 34th Brazilian Economics Meeting] 114, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
  12. Mirakhor, Abbas & Krichene, Noureddine, 2009. "The Recent Crisis: Lessons for Islamic Finance," MPRA Paper 56022, University Library of Munich, Germany.

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