Finance and Credit
 

Powers of the Central Bank in the context of the liquidity preference theory of J.M. Keynes

Vol. 24, Iss. 9, SEPTEMBER 2018

Received: 1 June 2018

Received in revised form: 15 June 2018

Accepted: 29 June 2018

Available online: 28 September 2018

Subject Heading: THEORY OF FINANCE

JEL Classification: F31, F41, L52

Pages: 2201–2213

https://dоi.оrg/10.24891/fc.24.9.2201

Gogokhiya D.Sh. Institute of Economics of RAS, Moscow, Russian Federation
gogohia.dorik@yandex.ru

ORCID id: not available

Subject This article considers the powers of the Central Bank, their justification and the shortcomings of this justification.
Objectives The article aims to discuss the expansion of the powers of the Central Bank not as a lender only, but also as a borrower of last resort.
Methods For the study, I used the historical-logical and functional methods. These methods helped J.M. Keynes develop a macroeconomic theory of liquidity preference and refine the theory of interest and money demand. I also used the methods of comparative economic analysis to study the theoretical constructions of Keynes.
Results The article identifies the grounds that allow to differentiate the demand for money as a store of value and demand for money as a medium of payment for production resources and other capital assets. The article says that the liquidity preference theory by J.M. Keynes, as it is formulated in The General Theory of Employment, Interest and Money, Chapter 17, gives the basic guidelines for search of such bases and accordingly, ways of improvement of the modern monetary system as a central bank system with deposit fractional-reserve banking.
Conclusions and Relevance The analysis reveals specific features of supply and demand in the money market and the potential of the Central Bank to provide through a differentiated interest policy the unconditional safety of the value of monetary assets. The results obtained can be used for discussion and choice of monetary policy options.

Keywords: money supply, demand for money, Central Bank, liquidity, maintenance costs

References:

  1. Weber M. Protestantskaya etika i dukh kapitalizma [Die protestantische Ethik und der Geist des Kapitalismus]. Moscow, East View Publ., 2002, 352 p.
  2. Vymyatnina Yu. Teoriya deneg. Uroki krizisa [Money theory. Crisis lessons]. St. Petersburg, EUSP Press Publ., 2013, 272 p.
  3. Gogokhiya D.Sh. Den'gi, kredit i banki [Money, credit and banks]. Moscow, Institute of Economics RAS Publ., 2016, 45 p.
  4. De Cecco M. Zolotoi standart. New Palgrave. Ekonomicheskaya teoriya [The Gold Standard. In: The New Palgrave: The World of Economics]. Moscow, INFRA-M Publ., 2004, pp. 394–412.
  5. Keynes J.M. Obshchaya teoriya zanyatosti, protsenta i deneg [The General Theory of Employment, Interest and Money]. Moscow, Ekonomika Publ., 1993, 543 p.
  6. Smith A. Issledovanie o prirode i prichinakh bogatstva narodov [An Inquiry into the Nature and Causes of the Wealth of Nations]. Moscow, Eksmo Publ., 2016, 1056 p.
  7. Hicks J.R. Stoimost' i kapital [Value and Capital]. Moscow, Progress Publ., 1993, 191 p.
  8. Hicks J.R. Teoriya ekonomicheskoi istorii [A Theory of Economic History]. Moscow, NP Zhurnal Voprosy Ekonomiki Publ., 2006, 224 p.
  9. Trunin P., Vashchelyuk N. [The analysis of money supply endogeneity in Russia]. Zhurnal Novoi Ekonomicheskoi Assotsiatsii = Journal of the New Economic Association, 2015, no. 1, pp. 103–131. URL: Link (In Russ.)
  10. Ferguson N.C.D. Voskhozhdenie deneg [The Ascent of Money]. Moscow, Corpus Publ., 2015, 448 p.
  11. Schumpeter J.A. Teoriya ekonomicheskogo razvitiya [Theorie der wirtschaftlichen Entwicklung]. Moscow, Direktmedia Pablishing Publ., 2008, 401 p.

View all articles of issue

 

ISSN 2311-8709 (Online)
ISSN 2071-4688 (Print)

Journal current issue

Vol. 24, Iss. 9
September 2018

Archive