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Keynesian capital theory: Declining interest rates and persisting profits

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  • Spahn, Peter

Abstract

The current debate whether zero interest rates are caused by a saving glut or a liquidity glut is resolved by the distinction between the market and the natural rate, where saving affects only the latter variable, and monetary policy mainly the first. This topic is linked to a second one: the monetary determination of the rate of profit in Keynesian capital theory. Both topics merge in a critical review of Keynes's vision of the "euthanasia of the rentier". The data show however that we have not reached a state of capital satiation. The rising gap between the rate of profit and the rate of interest poses a challenge for capital theory.

Suggested Citation

  • 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.
    • Handle: RePEc:zbw:hohdps:102019
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    More about this item

    Keywords

    saving vs. liquidity; zero interest rates; capital satiation;
    All these keywords.

    JEL classification:

    • B1 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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