Abstract

MISSAGLIA, Marco  and  SANCHEZ, Patricia. LIQUIDITY PREFERENCE IN A WORLD OF ENDOGENOUS MONEY: A SHORT-NOTE. Cuad. Econ. [online]. 2020, vol.39, n.81, pp.595-612. ISSN 0121-4772.  https://doi.org/10.15446/cuad.econ.v39n81.78536.

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.

Keywords : Liquidity preference; endogenous money; Keynesian macroeconomics; financial markets.

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