Table of Contents

A Handbook of Alternative Monetary Economics

A Handbook of Alternative Monetary Economics

Elgar original reference

Edited by Philip Arestis and Malcolm Sawyer

This major Handbook consists of 29 contributions that explore the full range of exciting and interesting work on money and finance currently taking place within heterodox economics. There are many themes and facets of alternative monetary and financial economics but two major ones can be identified.

Chapter 17: The Theory of Interest Rates

John Smithin

Subjects: economics and finance, financial economics and regulation, money and banking, post-keynesian economics

Extract

John Smithin* Introduction In discussing the treatment of interest rates in heterodox monetary analysis, there are three key issues that need to be debated/discussed before any other matters can usefully be raised. There are (1) the basic or essential nature of interest, and, specifically, whether or not it is purely a ‘monetary phenomenon’ as Keynes said, or simply the reflection of some other, supposedly more ‘real’, economic phenomenon, (2) the distinction between real (in the sense of inflation-adjusted) interest rates and nominal interest rates (in principle, this is an entirely different issue from the first point), and (3), the relationship between interest rates on securities with different terms to maturity, that is between ‘short’ and ‘long’ interest rates. The first three sections of this chapter therefore deal with each of these points in turn. There then follows a discussion of alternative theories of interest rate determination. Writers such as Hicks (1989) and Smithin (1994; 2003), for example, have previously claimed that there are fundamentally three such theories, but in this chapter it is now argued that it is more useful to think of four alternatives, the fourth (actually the most influential in orthodox circles) being a hybrid of two of the others. Finally, there must be some discussion of the thorny question of the ethics of the principle of interest on money, in the context of a capitalist-type economic system. The nature of interest Fletcher (1987, 154) highlights an important quote from Keynes to...

You are not authenticated to view the full text of this chapter or article.

Elgaronline requires a subscription or purchase to access the full text of books or journals. Please login through your library system or with your personal username and password on the homepage.

Non-subscribers can freely search the site, view abstracts/ extracts and download selected front matter and introductory chapters for personal use.

Your library may not have purchased all subject areas. If you are authenticated and think you should have access to this title, please contact your librarian.

Further information