Liquidity preference in a world of endogenous money: A short-note

Marco Missaglia, Patricia Sanchez
2020 Cuadernos de Economía  
We argue that even in the case that banks are able to maintain the interest rate at a level that they want (the most "radical" version of the theory of endogenous money), liquidity preference continues to constitute a key element when determining the real equilibrium of the economy. In a framework of endogenous money, the Keynesian theory of liquidity preference still constitutes a theory that determines level of income. Financial markets matter, and the Kaldorian idea that liquidity preference
more » ... iquidity preference "ceases to be of any importance" can only be defended under a set of very restrictive assumptions.
doi:10.15446/cuad.econ.v39n81.78536 fatcat:eoxhnotojnehfe7yg7qefb3iqy