The independence of finance from saving: A flow-of-funds interpretation
AbstractKeynes's proposition that consumption-and-saving decisions on the part of the public exert no direct influence on the conditions of finance faced by investors contrasts with the loanable funds theory claim that a public's shift from consumption to saving with the purpose of purchasing securities generates an excess supply of funds that eases conditions in the capital market. This paper provides a simple kind of flow-of-funds model where the flow of savings on the part of households, even when it is entirely directed to the purchase of securities, is not a net component of the supply of funds in the capital market. Thus, Keynes's proposition about the independence of finance from saving does not require the assumption of a hidden increase in liquidity preference. Rather, it is based upon a specific conception of the finance process in a monetary economy.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by EconWPA in its series Macroeconomics with number 0405017.
Length: 10 pages
Date of creation: 15 May 2004
Date of revision:
Note: Type of Document - pdf; pages: 10. letter format
Contact details of provider:
Web page: http://22.214.171.124
Flow-of-funds model; Keynesian theory; Finance and saving;
Other versions of this item:
- Andrea Terzi, 1987. "The Independence of Finance from Saving: A Flow-of-Funds Interpretation," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 9(2), pages 188-197, January.
- E - Macroeconomics and Monetary Economics
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Victoria Chick, 1983. "Macroeconomics after Keynes: A Reconsideration of the General Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262530457, December.
- Hein, Eckhard, 1994.
"Investition, Finanzierung und Sparen: einige Implikationen der Keynes-Robertson-Kontroverse über den "Revolving Fund"
[Investment, finance and saving: some implications of the Keynes-Rob," MPRA Paper 19322, University Library of Munich, Germany.
- 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.
- Giovanni Cesaroni, 2001. "The finance motive, the Keynesian theory of the rate of interest and the investment multiplier," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 8(1), pages 58-74.
- Martin H. Wolfson, 1993. "Corporate Restructuring and the Budget Deficit Debate," Eastern Economic Journal, Eastern Economic Association, vol. 19(4), pages 495-520, Fall.
- Joerg Bibow, 2005. "Liquidity Preference Theory Revisited—To Ditch or to Build on It?," Method and Hist of Econ Thought 0508003, EconWPA.
- Jorg Bibow, 2005. "Liquidity Preference Theory Revisited: To Ditch or to Build on It?," Economics Working Paper Archive wp_427, Levy Economics Institute.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA).
If references are entirely missing, you can add them using this form.