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Alessandro Vercelli

This chapter investigates the rational foundations of liquidity preference theory as sketched by Keynes in The General Theory. Mainstream theory focuses on two determinants of liquidity preference related to weak uncertainty: risk aversion and transaction flexibility. Keynes, on the other hand, focused mainly on the nexus between liquidity preference and strong uncertainty, distinguishing two basic determinants: strong uncertainty aversion, and strong intertemporal flexibility. Though each of these determinants has been the object of specific interpretations of liquidity preference theory, this chapter suggests that we may encompass their analysis within a more general conceptual framework. To this end, the Keynesian concept of weight of argument plays a crucial role. In particular, we show that its variations along different phases of the business cycle alter the impact of each of the components of liquidity preference.

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Alessandro Vercelli

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Alessandro Vercelli

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Alessandro Vercelli

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Domenica Tropeano and Alessandro Vercelli

In the chapter, ‘Debt deflation theory and the Great Recession,’ on the basis of the theory of Irving Fisher, the authors analyse the accumulation of debt in the USA and Europe, emphasizing that the monetary policy deployed in the former did manage to save the banking system, and this did not happen in Europe due to the European Central Bank being less able to intervene in the economy, and the absence of an authority empowered to coordinate spending.
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Simone Borghesi and Alessandro Vercelli

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Giampaolo Gabbi, Alesia Kalbaska and Alessandro Vercelli