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ABSTRACT Keynes and Hayek are usually perceived in the history of economic thought as intellectual rivals. Although it is true that in terms of policy recommendations, they have not always seen eye to eye, there are numerous theoretical elements that the two economists tend to share. This is especially true if one follows Axel Leijonhufvud (1976) in considering that Keynes’s fundamental theoretical work is the Treatise and not the General Theory. In the early 1930s, following the works of Wicksell (1989), both explained business cycles as caused by a discrepancy between savings and investment. They considered that in the modern economy the interest rate cannot speedily adjust these two magnitudes. To a certain extent, Keynes and Hayek even agreed on the dynamic sequence of prices in a “normal” depression. By the time the General Theory came out, liquidity preference obscured most of the commonalities between the two economists. Although Hayek introduced liquidity preference as a short run friction in his 1941 Pure Theory of Capital, he could not accept it as a fundamental determinant of the interest rate. However, in the 1970s Hayek began to believe that “normal” Hayekian crises could further degenerate into Keynesian depressions. By focusing on Keynes’s theoretical development prior to the elaboration of the General Theory in parallel with Hayek’s evolution throughout his life, we argue that a selective reading of their works could lead to a theoretical model in which Keynesian and Hayekian scenarios are specific cases of a more general theory.

ABSTRACT This paper provides a theoretical account of the role of regional differences in cyclical patterns of credit availability for patterns of regional convergence or divergence. While mainstream theories imply either equalising regional capital flows, or else lower credit availability for peripheral regions due to market imperfections, Post-Keynesian theory of liquidity preference and financial structure imply the scope for greater credit volatility for peripheral regions, especially in downturns, contributing to real economic divergence. This latter account is assessed by means of an empirical analysis of patterns in bank credit over the business cycle among the Spanish regions and Eurozone countries.

In the present paper, we investigate the financial homogeneity of the euro area economies by contrasting eurozone countries’ responses to monetary policy steps to the theoretical assumptions of the liquidity trap phenomenon. Our assumption is that the euro area economies are not completely homogeneous. Hence, in a zero-interest rate environment, the asset holding decisions of economic agents exhibit detectable differences across countries. We verify our assumptions using Eurostat data. We use the financial asset stocks of the euro area countries to cluster the countries concerned. Previous literature has not examined changes in the ratio of financial assets to GDP, nor differences in structural changes in the total stock of financial assets under the zero lower bound. The paper uses k-centers cluster analysis based on Euclidean distance for detecting changes in the portfolio holdings of eurozone economic actors owing to economic crises and monetary policy responses. The results confirm that euro area financial markets are fragmented. There are significant differences across asset markets of different Eurozone countries, both during and after the crisis. Despite some similarities in the portfolio rearrangement across countries, the ECB’s monetary policy does not have a uniform impact on euro area financial markets, and notable differences prevail in the financial asset structures of the economies concerned.

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 “ceases to be of any importance” can only be defended under a set of very restrictive assumptions.

In modern, sophisticated banking systems, in addition to endogenously creating money, banks have the ability to innovate and stretch constraints on their portfolio to potentially raise profits. They fulfill demand for credit according to their liquidity preference and expectations of profits. On the other hand, the monetary authority influences credit supply by changing the availability of liquid assets compared to other assets through monetary policy instruments. By managing liquidity in the reserves market, central banks modify the price of access to short-term liquidity – the interest rate – and, thereby, cause changes in the yield curve and transform banks’ propensity to expand credit. Even though determining credit supply is a difficult task since it depends on expectations and cannot be calculated in advance, this paper aims to determine a credit supply function for Brazil. Our empirical strategy was to estimate a dynamic panel data model on a large cross-section bank-level dataset from the Brazilian Central Bank using balance sheet information from the fifty largest banks operating in the country from 1999 to 2016. Credit outstanding was matched with time-varying indicators that were prepared using data from banks’ portfolios and then combined with macroeconomic variables. We use a Post-Keynesian framework to analyze the relation between credit supply and the balance sheet composition of banks. Our findings suggest that variations in banks’ liquidity preference which are reflected on their changes in flexibility and leverage indicators have a significant impact on credit supply in Brazil.JEL codes: E51, E52, E47

Extant literature nearly exclusively explains the current account imbalances in the euro area by blaming wage policy. Mainstream economics considers wage policy as responsible for both trade imbalances and the split between debtor and creditor countries. In contrast, this article argues that cross-border capital flows come first, and affect aggregate demand and production costs. Trade flows and the real exchange rate adjust to financial flows. The rationale of this reversed argument is Keynes’ liquidity theory of interest. The policy implications drawn from the argument point in the direction of more capital controls rather than controls on wage formation. JEL Classification: E12; E43; F36

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.

Extant literature nearly exclusively explains the current account imbalances in the euro area by blaming wage policy. Mainstream economics considers wage policy as responsible for both trade imbalances and the split between debtor and creditor countries. In contrast, this article argues that cross-border capital flows come first, and affect aggregate demand and production costs. Trade flows and the real exchange rate adjust to financial flows. The rationale of this reversed argument is Keynes’ liquidity theory of interest. The policy implications drawn from the argument point in the direction of more capital controls rather than controls on wage formation. JEL Classification: E12; E43; F36

Financial exclusion in Brazil: a regional investigation. Despite the fact that after the second half of the nineties the studies of financial exclusion have gained strength among the studies about poverty and regional and social inequalities, a few studies about this problem had appear in the Brazilian economic literature. The present work aims to contribute to this discussion by doing a regional investigation about the phenomenon of financial exclusion inside Brazil. The main hypothesis of the study is that this phenomenon is not disassociated of the space in which it happens. Thought of the use of proxies two dimensions of financial exclusion had been studied: the access to financial services and the suitability of it.

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.

The main purpose of this article is to briefly present the Keynesian explanation of business cycle, economic fluctuation and crises, and also the solutions proposed from Keynesian perspective to the economic problems that characterize the bust phases of the business cycles (unemployment, recessions). In the fourth section of the article some criticisms of the Keynesian theoretical approach of the economic crises are considered and summarized.

O artigo procura discutir os impactos da crise internacional na economia brasileira, com ênfase na virtual paralisia do mercado de crédito bancário doméstico a partir de setembro de 2008. Sustenta-se que a dinâmica concorrencial bancária conduziu à emergência de práticas de alto risco, cujo potencial desestabilizador veio à tona quando da reversão das expectativas ante o agravamento da crise financeira internacional e seus efeitos-contágio sobre as economias periferias, dentre as quais o Brasil. O conservadorismo dos bancos na fase de retração foi exacerbado, no caso brasileiro, pelo prazo relativamente curto do crédito e pela existência de títulos públicos líquidos, rentáveis e de baixo risco, que permitem uma rápida recomposição dos seus portfólios. A desaceleração da atividade produtiva em decorrência da contração do crédito não foi mitigada pelo Banco Central, apegado ao seu mandato de guardião da estabilidade dos preços.This article discusses the impacts of the international crisis on the Brazilian economy, with emphasis on the virtual paralysis of the domestic banking credit market that has occurred since September 2008. It argues that the dynamics of banking competition led to the emergence of high-risk practices. The destabilizing potential of these practices came to light when the aggravation of the international financial crisis and its contagion in peripheral countries such as Brazil caused a reversal of expectations. Generalized conservative behavior by banks during the retraction phase was exacerbated in Brazil by the relatively short credit cycle and by the liquidity, profitability and low-risk of public bonds, allowing a rapid recomposition of portfolios. The Central Bank, sticking to its mandate as the guardian of price stability, failed to move to mitigate the deceleration of productive activities that resulted from the contraction of credit.

L'importanza relativa delle idee che formano la teoria keynesiana è stata a lungo oggetto di controversie per quanto riguarda la possibilità di individuare un nucleo di concetti fondamentali che sono logicamente separabili dagli altri. Uno dei punti discussi è il ruolo della teoria degli investimenti e della preferenza per la liquidità rispetto al principio della domanda effettiva :questi aspetti costituiscono un tutto le cui parti si sostengono a vicenda , o sono in qualche modo "autonomi " , analiticamente separabili e quindi sostituibili ? JEL: E12

Resumo Este trabalho explica a dolarização financeira e sua persistência para 79 economias com diferentes graus de desenvolvimento, utilizando o arcabouço teórico pós-keynesiano. A proposição é a de que a busca por moeda externa forte em períodos de boom e de escassez de Liquidez Externa varia de acordo com a categoria minskyana dos países, pois as oscilações dos capitais externos provocam efeitos distintos sobre a Preferência pela Liquidez em países hedge e em países speculative-ponzi. Uma menor disponibilidade de recursos externos para as economias mais vulneráveis causa um aumento na Preferência pela Liquidez dos seus agentes, gerando elevação no grau de sua dolarização financeira. Assim, em períodos de queda na liquidez internacional as economias speculative-ponzi aumentam sua demanda por moeda externa forte, que serve para compra de ativos e para proteção contra incertezas, resultado este não encontrado para economias hedge. Ademais, a persistência da dolarização é explicada pelo alto nível de endividamento presente em economias mais vulneráveis externamente.