Keynes' Theory of the Interest Rate: A Critical Approach

Authors

  • Katarzyna Appelt Poznan University of Economics and Business

DOI:

https://doi.org/10.18096/TMP.2016.01.01

Keywords:

interest rate, liquidity preference, demand for money, classical school, Keynes

Abstract

John M. Keynes – the author of General Theory of Employment, Interest and Money – assumed that the interest rate is the price which brings into equilibrium the desire to hold wealth in cash with the supply of cash resources, and the reward for parting with liquidity at the same time. He indicated liquidity preference as the key element of the theory of the demand for money, whereas the supply of money is a discretionary factor, i.e. depending on the policy pursued by monetary authorities. It has been proven that such an approach comes with at least three errors: inconsistency in defining the rate of interest, vicious circle in arguing and departure from the economics of value for functional adequacies.

Author Biography

Katarzyna Appelt, Poznan University of Economics and Business

Assistant Professor

References

DUWENDAG, D., KETTERER, K.H., KÖSTERS, W., POHL R., SIMMERT, D.B. (1995): Teoria pieniężna i polityka pieniężna. Monetary Theory and Monetary Policy. Warszawa: Poltext.

KEYNES, J. M. (1960): The General Theory of Employment, Interest and Money. New York: London Macmillan & Co.

RĄCZKOWSKI, S. (1948): Teoria pieniądza J. M. Keynesa. Monetary Theory of J. M. Keynes. Warszawa – Łódź: Wydawnictwo Kazimierza Rutskiego. SCHAAL, P. (1996): Pieniądz i polityka pieniężna. Geldtheorie und Geldpolitik. Theory of Money and Monetary Policy. Warszawa: Państwowe Wydawnictwo Ekonomiczne.

TAYLOR, E. (1958): Historia ekonomiki. History of Economics. Poznań: Państwowe Wydawnictwo Naukowe.

WICKSELL, K. (1936): Interest and Prices (Geldzins und Gutterpreise), A Study of the Causes Regulating the Value of Money. London: Macmillan & Co.

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Published

2016-07-15

How to Cite

Appelt, K. . (2016). Keynes’ Theory of the Interest Rate: A Critical Approach. Theory, Methodology, Practice – Review of Business and Management, 12(01), 3–8. https://doi.org/10.18096/TMP.2016.01.01