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Natural and Market Rates of Interest and the Trade Cycle

  • John R. Presley

Abstract

As has been hinted at on several occasions, an increasing number of economists from the early part of the 20th century onwards attempted to explain cyclical fluctuations in terms of a divergence between the natural and the market rate of interest. This stimulated Robertson to devote an article to an examination of this explanation of the cycle in 1934.1 This chapter begins with a brief historical picture of the distinction that has been made between natural and market rates of interest, it then explores the use made of this distinction by the Swedish and Austrian schools in explaining the cycle, and ends with Robertson’s own views on the natural rate of interest and its role in the cycle.

Keywords

Money Supply Demand Curve Natural Rate Full Employment Price Stability 
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Natural and Market Rates of Interest and the Trade Cycle

  1. 1.
    DHR, ‘Industrial Fluctuation and the Natural Rate of Interest’, EJ, (December 1934) pp. 650–56.Google Scholar
  2. 2.
    See T. Wilson, Fluctuations in Income and Employment, (London: Pitman, 1942) p. 9n.Google Scholar
  3. 3.
    A. Smith, Wealth of Nations, (London, 1904 ed.) Vol. 1, p. 337.Google Scholar
  4. 4.
    J. S. Mill, The Parliamentary History and Review, (1826) p. 646.Google Scholar
  5. 8.
    D. Patinkin, Money, Interest and Prices, (New York: Harper and Row, 1965 ed.) p. 631, Appendix J.Google Scholar
  6. 22.
    See L. Klein, The Keynesian Revolution, (London: Macmillan, Papermac, 1965) p. 21.Google Scholar
  7. 26.
    See B. Thomas, ‘The Monetary Doctrines of Professor Davidson’, EJ, Vol. 45, (1935) pp. 36ff.Google Scholar
  8. 29.
    DHR, ‘Some Notes on Mr Keynes’ General Theory of Employment’, QJE, Nov. 1936, pp. 168–91.Google Scholar

Copyright information

© John R. Presley 1978

Authors and Affiliations

  • John R. Presley

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