Interest and Money

  • Lester D. Taylor


One of the biggest controversies sparked by the General Theory concerned the determination of the rate of interest. Until the General Theory, the generally accepted view was that the rate of interest was determined in the capital market, defined in terms of the demand and supply of savings. The demand for savings was represented by the investment demand function, which depicted a negative relationship between investment and the rate of interest, while the supply of savings was represented by the savings function, which described a positive relationship between the interest rate and the amount saved out of income. The market was assumed to clear at the point where supply equals demand, thereby establishing investment, saving, and the market rate of interest.


Central Bank Banking System Commercial Bank Bank Loan Trade Credit 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


  1. Baumol, W.J. (1953), “The Transactions Demand for Cash: An Inventory Theoretic Approach,” Quarterly Journal of Economics, Vol. 61, pp. 545–56.Google Scholar
  2. Cassell, G. (1903), The Nature and Necessity of Interest (reprinted by Kelley Millman, 1957).Google Scholar
  3. Clower, R.W. (1967), “A Reconsideration of the Microfoundations of Monetary Theory,” Western Economic Journal, Vol. 6, No. 1, pp. 1–8 (reprinted in Money and Markets: Essays by Robert W. Clower, ed. by D.A. Walker, Cambridge University Press, 1984).Google Scholar
  4. Davidson, P. (1978), Money and the Real World (second edition), John Wiley and Sons, New York.Google Scholar
  5. Fisher, I. (1930), The Theory of Interest (reprinted by Augustus M. Kelley, 1961).Google Scholar
  6. Friedman, M. (1974), “A Theoretical Framework for Monetary Analysis,” in Milton Friedman’s Monetary Framework, ed. by R.J. Gordon, University of Chicago Press, Chicago.Google Scholar
  7. Gurley, J. and Shaw, E.S. (1965), Money in a Theory of Finance, The Brookings Institute, Washington, D.C.Google Scholar
  8. Hicks, J.R. (1946), Value and Capital (second edition), Oxford University Press, Oxford.Google Scholar
  9. Keynes, J.M. (1936), The General Theory of Employment, Interest, and Money, Macmillan, London.Google Scholar
  10. Keynes, J.M. (1937b), “Alternative Theories of the Rate of Interest,” Economic Journal, Vol. 47, pp. 241–52.CrossRefGoogle Scholar
  11. Keynes, J.M. (1937c), “‘Ex Ante’ Theory of the Rate of Interest,” Economic Journal, Vol. 47, pp. 663–9.CrossRefGoogle Scholar
  12. Kiyotaki, N. and Wright, R. (1989), “On Money as a Medium of Exchange,” Journal of Political Economy, Vol. 97, pp. 927–54.CrossRefGoogle Scholar
  13. Kiyotaki, N. and Wright, R. (1991), “A Contribution to the Pure Theory of Money,” Journal of Economic Theory, Vol. 53, pp. 215–35.CrossRefGoogle Scholar
  14. Meltzer, A.H. (1988), Keynes’s Monetary Theory: A Different Interpretation, Cambridge University Press, Cambridge.Google Scholar
  15. Minsky, H.P. (1975), John Maynard Keynes, Columbia University Press, New York.Google Scholar
  16. Von Mises, L. (1934), The Theory of Money and Credit, translated from the German by H.E. Batson, Jonathan Cape Ltd., London; Yale University Press, 1953; Liberty Classics, 1981.Google Scholar
  17. Ohlin, B. (1937), “Some Notes on the Stockholm Theory of Saving and Investment,” Economic Journal, Vol. 37, pp. 53–69, 221–40.CrossRefGoogle Scholar
  18. Robertson, D.H. (1937), “Alternative Theories of the Rate of Interest,” Economic Journal, Vol. 47, pp. 428–36.CrossRefGoogle Scholar
  19. Schwartz, A.J. (1987), “Banking School, Currency School, Free Banking School,” in The New Palgrave: A Dictionary of Economics, ed. by J. Eatwell, M. Milgate and P. Newman, Macmillan, London.Google Scholar
  20. Shackle, G.L.S. (1967), The High Years of Theory, Cambridge University Press, Cambridge.Google Scholar
  21. Tobin, J. (1956), “The Interest Elasticity of Transactions Demand for Cash,” Review of Economics and Statistics, Vol. 38, No. 3, pp. 241–7.CrossRefGoogle Scholar
  22. Tobin, J. (1969), “A General Equilibrium Approach to Monetary Theory,” Journal of Money, Credit, and Banking, Vol. 1, No. 1, pp. 15–29.CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media, LLC 2010

Authors and Affiliations

  1. 1.Department of EconomicsUniversity of ArizonaTucsonUSA

Personalised recommendations