INTEREST AS AN ARTEFACT OF SELF‐VALIDATING CENTRAL BANK BELIEFS

Tony Aspromourgos

39 citations0/0 files storedMetroeconomica

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Economic Theory and Policy Monetary Policy and Economic Impact Economic theories and models

Abstract

ABSTRACT The classical/Sraffian approach to distribution is proposed as a more congenial framework for Keynes's concept of interest as a conventional variable—resulting from the interplay between central bank behaviour and financial market sentiment—because it provides a sounder basis for multiple interest rate equilibria. While either monetary policy or market expectations can be decisive, the capacity of policy to ensure markets acquiesce in the authorities' view remains at least as plausible as Keynes supposed. Interest is a result of ‘history’ plus the beliefs of the monetary authorities, where those beliefs may be illusory but nevertheless validated by actual outcomes.

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References

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2014Keynes, Lerner, and the Question of Public Debt 2020Growth, investment share and the stability of the Sraffian Supermultiplier model in the U.S. economy (1985–2017)2018KEYNES, PUBLIC DEBT, AND THE COMPLEX OF INTEREST RATES 2020Stagnation and unnaturally low interest rates: a simple critique of the amended New Consensus and the Sraffian supermultiplier alternative*2011CAN (AND SHOULD) MONETARY POLICY PURSUE A ZERO REAL INTEREST RATE, PERMANENTLY?

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