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The General Theory and monetary policy: Investment versus inflation

Author

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  • Geoff Tily

    (Government Economics Service, UK)

Abstract

Keynes's theory of investment and the economic cycle is set out. Against this theory it is argued that the current monetary policy framework is not credible. Rather, given its implicit endorsement of financial liberalisation, it is, and has proved, deeply dangerous. Keynes advocated policies aimed at setting a low long-term rate of interest. Financial liberalisation has led to the dear rates that Keynes understood as the cause of the Great Depression. The discussion also examines Keynes's vigilant approach to infl ation and argues that the inflation of the 1970s was connected with liberalisation not Keynes. The loss of the central role for investment and the pre-occupation with inflation in post-Keynesian economics is traced. Finally events from the golden age to the present debt-deflation are examined according to this perspective.

Suggested Citation

  • Geoff Tily, 2009. "The General Theory and monetary policy: Investment versus inflation," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 6(1), pages 97-118.
    • Handle: RePEc:elg:ejeepi:v:6:y:2009:i:1:p:97-118
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    Cited by:

    1. Angel Asensio, 2012. "Between the Cup and the Lip: On Post Keynesian Interest Rate Rules and Long-term Interest Rate Management," Chapters, in: Louis-Philippe Rochon & Salewa ‘Yinka Olawoye (ed.), Monetary Policy and Central Banking, chapter 1, Edward Elgar Publishing.

    More about this item

    Keywords

    monetary policy; financial liberalisation; investment; inflation; debt deflation;
    All these keywords.

    JEL classification:

    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • B50 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - General
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General

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