Endogenous Money and the (Real) Rate of Interest: A Comment on Marc Lavoie

Betz, Karl

doi:10.48499/FHSWF.ME.IW.7

Published

Endogenous Money and the (Real) Rate of Interest : A Comment on Marc Lavoie

In contrast to Keynes' theory, the rate of interest is not modelled as a price for parting with cash but as a price required by wealth owners for holding (the national) currency. Thus the equilibrium discount rate of the central bank can be seen as determined by market forces. In consequence involuntary unemployment may occur at positive equilibrium rates of interest and is not limited to the zero lower bound.