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Long-term Bonds, Capital Gains and Liquidity Preference

  • Wynne Godley
  • Marc Lavoie

Abstract

The definition of wealth in Model PC in Chapter 4 comprised only two assets, money and bills. In this chapter a third asset, long-term government bonds, is introduced and this will provide an opportunity to discuss the notion of liquidity preference — hence the name Model LP — and also to introduce capital gains and losses into the system of accounts. An important feature of the new model will be that an increase in long-term interest rates will have a short-run negative effect on demand.

Keywords

Interest Rate Central Bank Disposable Income Capital Gain Monetary Authority 
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.

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Copyright information

© Wynne Godley and Marc Lavoie 2012

Authors and Affiliations

  • Wynne Godley
    • 1
  • Marc Lavoie
    • 2
  1. 1.King’s CollegeCambridge UniversityCambridgeUK
  2. 2.Department of EconomicsUniversity of OttawaCanada

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