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Loanable funds theory versus liquidity preference theory

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Summary

This paper argues that from a formal point of view there are no differences between the loanable funds and the liquidity preference theories of interest. This claim is based on references to publications by D.H. Robertson and J.M. Keynes. However, although these authors agree as to the factors underlying a momentary rate of interest, they are found to disagree on more fundamental matters. In particular, they make different assumptions concerning the motive forces underlying monetary economies.

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Authors and Affiliations

  1. University of Groningen, The Netherlands

    Jan Snippe

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  1. Jan Snippe
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Research underlying this paper has been financed by the Netherlands Organization for the Advancement of Pure Scientific Research (ZWO). The author is grateful to Professors P. Davidson, S.K. Kuipers and J.A. Kregel as well as to Dr. K. Groenveld for their comments on previous versions of this paper. Of course they bear no responsibility for the final result.

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Snippe, J. Loanable funds theory versus liquidity preference theory. De Economist 133, 129–150 (1985). https://doi.org/10.1007/BF01676404

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