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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. RESUMO Keynes e Hayek são geralmente vistos na história do pensamento econômico como rivais intelectuais. Embora seja verdade que, em termos de recomendações de políticas, elas nem sempre concordam, há vários elementos teóricos que os dois economistas tendem a compartilhar. Isso é especialmente verdadeiro se seguirmos Axel Leijonhufvud (1976) ao considerar que o trabalho teórico fundamental de Keynes é o Tratado e não a Teoria Geral. No início dos anos 1930, seguindo os trabalhos de Wicksell (1989), ambos explicaram os ciclos de negócios como causados por uma discrepância entre poupança e investimento. Eles consideraram que na economia moderna a taxa de juros não pode ajustar rapidamente essas duas magnitudes. Até certo ponto, Keynes e Hayek chegaram a concordar com a sequência dinâmica de preços em uma depressão “normal”. Quando a Teoria Geral foi publicada, a preferência pela liquidez obscureceu a maioria das semelhanças entre os dois economistas. Embora Hayek tenha introduzido a preferência pela liquidez como um atrito de curto prazo em sua Teoria Pura do Capital de 1941, ele não podia aceitá-la como um determinante fundamental da taxa de juros. No entanto, na década de 1970, Hayek começou a acreditar que as crises “normais” de Hayek poderiam degenerar ainda mais em depressões keynesianas. Ao focar no desenvolvimento teórico de Keynes antes da elaboração da Teoria Geral em paralelo com a evolução de Hayek ao longo de sua vida, argumentamos que uma leitura seletiva de suas obras poderia levar a um modelo teórico em que os cenários keynesiano e hayekiano são casos específicos de uma teoria geral.

Resumo Comportamentos atípicos das taxas de juros têm sido frequentes nas economias desenvolvidas. Apesar de intuitivamente improváveis, títulos soberanos com taxas de juros negativas estão presentes em grande parte dos países europeus e a curva a termo dos títulos do Tesouro apresentou inversão durante meses nos Estados Unidos. O presente artigo apresenta a influência do emprego de instrumentos convencionais e não convencionais de política monetária pelos Bancos Centrais sobre os fenômenos anteriormente mencionados, e uma interpretação fundamentada na Teoria da Preferência pela Liquidez de Keynes. Tal interpretação explica, a partir do comportamento dos agentes, por que os programas de compras de ativos públicos e privados, o controle da curva a termo e o modelo de comunicação baseado na prescrição futura (forward guidance) dos Bancos Centrais podem influenciar os mercados financeiros, com efeitos relativamente persistentes. Essa situação vem permitindo a ocorrência de fenômenos não habituais relacionados às taxas de juros. Abstract Unusual interest rate behavior has become increasingly frequent in developed economies. Even though intuitively unlikely, government bond yields in negative territory are found in most European countries, and inverted yield curves for Treasury bonds in the United States occurred during some months. This paper presents the influence of conventional and non-conventional monetary policy instruments over the previously mentioned phenomena, and an interpretation based on the Liquidity Preference Theory proposed by Keynes. This interpretation explains, based on agents’ behavior, why public and private asset purchase programs, yield curve control and communication based on forward guidance used by central banks could persist and influence financial markets. This situation has enabled the occurrence of atypical phenomena regarding interest rates.

This study estimated Nigeria's Keynesian and augmented money demand function using time series variables from 1986 through 2021. The Keynesian money demand function is estimated by considering income and interest rates as the determinants of the money demand function. In contrast, the augmented money demand function incorporates critical variables like exchange rate, income, and interest rates. With the Robust Ordinary Least Squares estimation method, the income level exerted a positive and significant effect on money demand, while interest rate put forth a negative but insignificant impact. The a priori signs of these two variables align with the Keynesian postulation that income directly correlates with the actual money demand function. At the same time, the rate of interest has an inverse relationship.Further findings from the augmented money demand function, as reported by the autoregressive distributed lag short-run estimates, indicate that the price level and exchange rate directly and significantly affect Nigeria's current money demand function. The money demand function so estimated was reported to be stable, given the cumulative sum of squares result. A general conclusion that can be drawn from the findings is that the money demand function is income elastic but inelastic regarding interest rate, price level, and exchange rate.

The Brazilian economy entered a deep recession in 2015–2016 and since then has shown a sluggish recovery. In this paper, we offer an interpretation for the slow growth based on Minsky’s financial instability hypothesis and recent literature on financialization and growth. We analyze the balance sheet of large non-financial companies over the period 2012–2019, a period that comprises the positive investment cycle—initiated during the commodities boom which lasted from the second half of the 2000s until 2014—the 2015–2016 recession, and the period preceding the shock of the COVID-19 pandemic. Based on Minsky’s taxonomy of financial profiles, we map a proxy for financial instability at the firm level based on Davis et al. (2019). We also propose an aggregate financial stability index. We conclude that after the 2015–2016 recession, companies have been restructuring their debt profile and adopting a defensive behavior, increasing their liquidity preference. Our analysis supports the interpretation that, even with the sharp fall in domestic real interest rates, the degree of confidence on expectations to recover investment in productive assets is low. This corroborates with the thesis that agents’ decisions do not respond only to supply stimulus, but are guided by expectations of future returns, which fundamentally depend on the performance of aggregate demand. Since 2015, Brazilian economic policy has been driven by fiscal consolidation, which has proven ineffective in increasing economic growth.

This is the peer reviewed version of the following article: Horii, R. & Ono, Y. (2021) Financial crisis and slow recovery with Bayesian learning agents. International Journal of Economic Theory, 1– 29, which has been published in final form at https://doi.org/10.1111/ijet.12322. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions. This article may not be enhanced, enriched or otherwise transformed into a derivative work, without express permission from Wiley or by statutory rights under applicable legislation. Copyright notices must not be removed, obscured or modified. The article must be linked to Wiley’s version of record on Wiley Online Library and any embedding, framing or otherwise making available the article or pages thereof by third parties from platforms, services and websites other than Wiley Online Library must be prohibited., In a simple continuous-time model where the learning process affects the willingness to hold liquidity, we provide an intuitive explanation of business cycle asymmetry and postcrisis slow recovery. When observing a liquidity shock, individuals rationally increase their subjective probability of re-encountering it. It leads to an upward jump in liquidity preference and a discrete fall in consumption. Conversely, as a period without shocks continues, they gradually decrease the subjective probability, reduce liquidity preference, and increase consumption. The recovery process is particularly slow after many shocks are observed within a short period because people do not easily change their pessimistic view.

In Keynes’s approach, interest rates are driven up by rises in demand for money and scaled down by rises in money supply. On the contrary, this paper argues that neither of these propositions will stand the test of scrutiny. Keynes traced demand for money to three main factors, the transaction, precautionary and speculative motives, but rises in demand associated with the transaction motive do not necessarily drive up the rate of interest. The paper shows also that the liquidity preference theory and the loanable funds theory are different theories and that the former is faulty, while the latter is correct.

The arguments that totally denied Chapter 17 of Keynes’ General Theory (GT) and the arguments that found the core of Keynesian revolution in Chapter 17 are shown to have a common interpretation tha...

Using as a test the drawn-out liquidity preference vs loanable funds debate between 1936 and 1956, this paper pursues two lines of inquiries: to illustrate first the progressive conquest of Keynesi...

Based on comparative empirical evidence for 22 major OECD countries, I argue that country differences in cumulative mortality impacts of SARS-CoV-2 are largely caused by: (1) weaknesses in public health competence by country; (2) pre-existing country-wise variations in structural socio-economic and public health vulnerabilities; and (3) the presence of fiscal constraints. The paper argues that these pre-existing conditions, all favorable to the coronavirus, have been created, and amplified, by four decades of neoliberal macroeconomic policies – in particular by (a) the deadly emphasis on fiscal austerity (which diminished public health capacities, damaged public health and deepened inequalities and vulnerabilities); (b) the obsessive belief of macroeconomists in a trade-off between ‘efficiency’ and ‘equity’, which is mostly used to erroneously justify rampant inequality; (c) the complicit endorsement by mainstream macro of the unchecked power over monetary and fiscal policy-making of global finance and the rentier class; and (d) the unhealthy aversion of mainstream macro (and MMT) to raising taxes, which deceives the public about the necessity to raise taxes to counter the excessive liquidity preference of the rentiers and to realign the interests of finance and of the real economy. The paper concludes by outlining a few lessons for a saner macroeconomics.

If cryptocurrencies are perceived as financial innovations that could disrupt domestic and international financial systems, it becomes imperative for economists to incorporate these virtual currencies into existing money market models. Cryptocurrencies, when fully adopted by the general public, would transmit into the financial system via money demand. Cryptocurrencies serve as money and non-money assets and have no perfect substitute, whereas they are perfect substitutes for M1. Therefore, how much impact would the popularity of cryptocurrencies have on domestic and international capital mobility? To isolate interest rate differentials across countries, the Mundell-Fleming model that assumes a constant interest rate in domestic and world economies was applied. Cryptocurrencies acquired in past periods that are acceptable worldwide would abrogate exchange rate differentials. This study theoretically finds that fiscal and monetary policies would have different impacts on income in economies with high cryptocurrency circulations compared to economies with only M1. Also, there is a critical interest rate where cryptocurrencies would be more attractive to investors than other non-money assets. Moreover, using the Keynesian aggregate income and aggregate expenditure model, without interest and exchange rate differentials, the worldwide use of cryptocurrencies in international trade would unveil the link between the twin deficits and international capital flows.

Purpose: The purpose of the paper is to identify students' attitudes in Poland towards saving and investment and evaluate determinants that influence the probability of accumulating funds and subjective satisfaction of financial results. Design/Methodology/Approach: The analysis was conducted using survey data collected in August 2018. Over 400 questionnaires were collected from Polish students using CAVI method. The structure of the sample corresponds to the target sample of students reported in another research. Statistical methods of analysis are used, i.e., analysis of empirical distribution and its characteristics and correlation measures. Logit regression models for microdata are used to evaluate the impact of factors that determine the probability of saving and investing money. Findings: In the sample, most students were fully aware that savings are important. However, the amount of money they were able to save is not big. Due to the liquidity preference, students typically keep money in ready cash and bank accounts. The factors determining propensity to save, propensity to invest and subjective satisfaction from savings have been specified. Practical Implications: The research results are useful for comparisons with other reports on savings and investment. They are useful for financial institutions policy creation and financial education. Originality/Value: This research's value lies in the original survey prepared under the supervision of a financial institution and applying the advanced econometric methodology., peer-reviewed

The present study investigates market-wide herding of stock market, industry indices of Pakistan, China and USA, A-cross border herding of Pakistan stock market with Chinese stock market and USA stock market. With Cross-Sectional-Absolute-Deviation, to check whether geographical distance matters to influence the stock markets or not and USA is its major influential, cannot be ignored. Market-wide herding in Pakistan is found only during 2004 and 2008 and A-cross border herding for Pakistan is only found from the USA which support asset pricing model and market efficiency. Pakistan market do not herd around China, this negates geographical distance matters, and influence in determining investor behaviour in stock markets. It is revealed, Pakistan stock market does not observe as much herding behaviour in stock investment as other markets (USA and China), so it can be said that Pakistan stock exchange index which is representative of Pakistan Stock market is efficiently operating in contest of Herding.

The impact of bank-specific factors on the performance of the deposit money banks in a country has been an area of inquiry for any bank-based financial system. The research investigates the impacts of bank-specific factors on bank performance in Nigeria within 2014-2018. This research use panel data from ten banks that had the best deposit in 2018. The panel data approach found a significant negative relationship between asset quality and return on asset and a significant positive relationship between loan-to-deposit ratio, capital adequacy, and return on asset. In this regard, strategic management should ensure chasing their functional intermediation role and ensure liquidity preference to meet its day-to-day obligations.JEL Classification: G21, G32, C33 How to Cite:Ariyibi, E. M., Yunusa, L. A., & Williams, T. O. (2020). Bank Specific Factors and Bank Performance: Evidence from Nigeria. Signifikan: Jurnal Ilmu Ekonomi, 9(2), 167-176. https://doi.org/10.15408/sjie.v9i2.14658.

The analytical tension in post-Keynesian thought between the theory of endogenous (credit) money and the theory of liquidity preference, brought to our attention by Dow and Dow (1989), can be viewed through the lens of the money view (Mehrling 2013) as a particular case of the balance between the elasticity of payment and the discipline of funding. Further, updating Fullarton’s 1844 “law of reflux” for the modern condition of financial globalization and market- based credit, the same money view lens offers a critical entry point into Tobin’s fateful 1963 intervention “Commercial Banks as Creators of ‘Money’” which established post-war orthodoxy, and also to the challenge offered by so-called Modern Money Theory.

Facing the uncertainty of internal and external environment, how to reasonably manage the cash flow and improve the competitiveness has become a hot research topic. Based on the theory of financing priority, liquidity preference and financing constraint, this paper analyzes the relationship between cash flow uncertainty and enterprise innovation, and verifies the effect of cash flow uncertainty on enterprise innovation. In addition, government subsidies and senior management shareholding are added into the original model as moderating variables to explore whether external factors of enterprises such as government subsidies and internal factors of enterprises such as governance structure will have an impact on the relationship between cash flow uncertainty and enterprise innovation.

This paper revisits Keynes’s theory of liquidity preference to emphasise its reliance on liquidity. By clarifying the meaning of ‘liquidity’ in the context of the theory, it is argued that liquidity preference is not based on the demand for money, the most tradable asset, or a theory of bearishness. Instead, liquidity preference represents a demand for price-protected (capital-safe) assets, most directly inside and outside money, but also cash-equivalent quasi-money such as self-liquidating assets and security repurchase agreements (repo). The theory of liquidity preference explains that the public is willing to forgo interest income to hold short-term price-protected assets due to the capital and price uncertainty associated with relying on market liquidity, or how easy it is to convert an asset into money. It follows that the rate of interest is a monetary phenomenon and is determined independently of saving and investment.

A discussão sobre o papel da moeda na economia e no desenvolvimento regional, só cresce ao longo dos anos. Na literatura muitos autores defendem que a moeda é neutra, mas outros autores baseados na teoria pós-keynesiana, consideram que a não neutralidade da moeda pode ajudar a aumentar ou diminuir a desigualdade no desenvolvimento regional, ou seja, moeda é endógena ao sistema econômico. Portanto, seguindo essa linha, o atual artigo tem como objetivo verificar o grau de preferência pela liquidez dos bancos e do público nos clusters de municípios presentes no estado do Rio de Janeiro. A partir de uma análise multivariada de cluster e baseados na teoria pós-keynesiana, foi possível observar a disparidade no grau de preferência entre os clusters. Em geral, quanto mais desenvolvido é o cluster de municípios, menor é o grau de preferência pela liquidez, seja dos bancos, seja do público, ficando evidente que o centro das regiões tende a concentrar a disponibilidade de crédito dos bancos e da utilização desses créditos por parte do público.

The idea of the hypothesis of the money supply as a theory is based on the Post Keynesians. This hypothesis suggests that there is a causal relationship between credit and money supply and monetary base in an economy. With the developing financial system and financial innovations, the endogeneity of money supply is one of the priority issues to be studied. For this reason it is important to consider the endogeneity of money supply in a theoretical and empirical context. In this study, the hypothesis of endogeneity money supply for Turkey's economy was investigated by Toda-Yamamoto and Bootstrap Toda-Yamamoto causality analysis procedures for the period 2006-2018. Empirical findings show that there is a causal relationship between credit and money supply, monetary base and money multiplier. There is also a causal relationship from money supply to credit. In this case, the bidirectional causality relationship between credit and money multiplier supports the view of liquidity preference regarding the endogeneity of money supply.

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. JEL: E12; E40; E44; E51. Resumen En este artículo argumentamos que incluso en el caso de que los bancos puedan mantener la tasa de interés al nivel que deseen (la versión más "radical" de la teoría de dinero endógeno), la preferencia por liquidez sigue constituyendo un elemento clave en la determinación del equilibrio real de la economía. En un marco de dinero endógeno, la teoría keynesiana de preferencia por la liquidez es aún una teoría para la determinación del nivel de ingreso. Los mercados financieros importan, y la idea kaldoriana sobre la relevancia de la preferencia por la liquidez solo puede defenderse con un conjunto de supuestos muy restrictivos. JEL: E12; E40; E44; E51. RESUMO Neste artigo argumentamos que inclusive em caso de que os bancos possam manter a taxa de juros ao nível esperado (a versão mais "radical" da teoria de dinheiro endógeno), a preferência por liquidez continua constituindo um elemento chave na determinação do equilíbrio real da economia. Em um marco de dinheiro endógeno, a teoria keynesiana de preferência pela liquidez é ainda uma teoria para a determinação do nível de ingresso. Os mercados financeiros importam, a ideia kal-doriana sobre a relevância da preferência pela liquidez só pode defender-se com um conjunto de supostos muito restritivos. JEL: E12; E40; E44; E51.

RESUMO Este artigo revisita as contribuições do professor Fernando Cardim de Carvalho sobre o tema do financiamento da acumulação de capital nas economias monetárias. Destaca duas funções que, idealmente, devem ser cumpridas pelo setor financeiro para permitir que as economias de mercado sustentem o crescimento e evitem instabilidade financeira. A primeira diz respeito à garantia da oferta adicional de liquidez criada por aumentos na produção e investimento (motiva finanças). A segunda refere-se à provisão de mecanismos para financiar empreendimentos de longo prazo, amenizando, portanto, a tendência à fragilidade financeira (financiamento) ao longo deste processo. O artigo baseia-se nos fundamentos apresentados por Cardim para sugerir que as instituições financeiras privadas muitas vezes não conseguem cumprir essas funções devido a problemas informativos e incertezas, especialmente na fase de transformação estrutural. Conclui defendendo a necessidade de políticas públicas para desenvolver mercados financeiros e instrumentos adequados para apoiar o desenvolvimento econômico, que envolve investimentos transformacionais. ABSTRACT This paper revisits the contributions of Professor Fernando Cardim de Carvalho on the theme of the financing of capital accumulation in monetary economies. It highlights two functions that ideally should be fulfilled by the financial sector to allow market economies to sustain growth and avoid financial instability. The first one relates to ensuring the additional supply of liquidity created by hikes in production and investment (finance motive). The second refers to the provision of mechanisms to fund long-term undertakings, therefore softening the tendency to financial fragility (funding) along the process. The article builds on the foundations put forth by Cardim to suggest that private financial institutions often fail to fulfill these functions due to informational problems and uncertainty, especially in the phase of structural transformation. It concludes by advocating the need for public policies to develop financial markets and instruments that are appropriate to support economic development, which involves transformational investments.

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 Dans les systèmes bancaires modernes et sophistiqués, en plus de créer de la monnaie de forme endogène, les banques ont la capacité d’innover et d’étirer les contraintes sur leur portefeuille et d’augmenter le profit potentiel. Ils satisfont la demande de crédit en fonction de leur préférence de liquidité et des attentes de gains futurs. L’autorité monétaire, à son tour, influence l’offre de crédit en modifiant la disponibilité des actifs liquides par rapport à toutes les autres classes d’actifs par le biais de ses instruments de politique monétaire. En gérant la liquidité sur le marché des réserves, la banque centrale peut modifier le prix d’accès à la liquidité à court terme - le taux d’intérêt - et, de ce fait, provoquer des changements dans la courbe de rendement et transformer la propension des banques à accroître le crédit. Cet article vise à déterminer une fonction d’offre de crédit pour le Brésil, bien qu’il s’agisse d’une tâche intrinsèquement difficile, car l’offre de crédit dépend des attentes et n’est pas calculée à l’avance. Notre stratégie empirique consistait à estimer un modèle de données de panel dynamique sur un grand ensemble de données transversales de la Banque centrale du Brésil au bilan des cinquante plus grandes banques opérant dans le pays de 1999 à 2016. Le crédit total a été jumelé à des indicateurs variant dans le temps qui ont été préparés à partir des données du portefeuille des banques, puis combinés avec des variables macroéconomiques. Nous utilisons un cadre Post-Keynésien pour analyser la relation entre l’offre de crédit et la composition du bilan des banques. Nos résultats suggèrent que les changements dans la préférence de liquidité des banques qui se reflètent dans les ajustements qu’ils apportent aux indicateurs de flexibilité et de l’effet de levier ont un impact significatif sur l’offre de crédit au Brésil.

In a simple continuous-time model where the learning process affects the willingness to hold liquidity, we provide an intuitive explanation of business cycle asymmetry and post-crisis slow recovery. When observing a liquidity shock, individuals rationally increase their subjective probability of re-encountering it. It leads to an upward jump in liquidity preference and a discrete fall in consumption. Conversely, as a period without shocks continues, they gradually decrease the subjective probability, reduce liquidity preference, and increase consumption. The recovery process is particularly slow after many shocks are observed within a short period because people do not easily change their pessimistic view.

Money is an institution that can only function when it perfectly manages the relationship between sovereignty and confidence. The foundation of this monetary relationship can focus on two directions: either a top-down process based on sovereignty so as to justify public confidence in the money; or a bottom-up process starting from building confidence through coordination and learning among individuals to explain the organization of a sovereign monetary authority. Starting from the three hierarchical levels of confidence (methodical, hierarchical and ethical) highlighted by Michel Aglietta and André Orléan (2002), the first process emphasizes the importance of a sovereign political power as the foundation of confidence and multiplies the rules and norms necessary for methodical confidence, while being a guarantor of the social values in the monetary compromise issuing from ethical confidence. The monetary order is based on the exercise of hierarchical political power from top to bottom. Money thus becomes a ‘total social fact’ (Simmel quoted in Aglietta, 2008, p. 4).