6533b871fe1ef96bd12d0cf3
RESEARCH PRODUCT
Limits to Arbitrage and Interest Rates: a Debate Between Keynes, Hawtrey and Hicks
Lucy Brillantsubject
short-term rate of interestarbitragesmonetary policybanksJEL: B - History of Economic Thought Methodology and Heterodox Approachesinstability of creditJEL : B - History of Economic Thought Methodology and Heterodox Approachespreferred habitat[ SHS.ECO ] Humanities and Social Sciences/Economies and financesdiscretionary policiesE58JEL : E - Macroeconomics and Monetary Economics/E.E4 - Money and Interest Rates/E.E4.E43 - Interest Rates: Determination Term Structure and Effects[SHS.ECO] Humanities and Social Sciences/Economics and FinanceE52central bankprofessional dealersbills[SHS.ECO]Humanities and Social Sciences/Economics and Financeconvertibilitylong-dated assetsmoneyprofessional dealers JEL Codes: B22JEL: E - Macroeconomics and Monetary Economics/E.E4 - Money and Interest Rates/E.E4.E43 - Interest Rates: Determination Term Structure and Effectsdiscount rate of interestE43expectationsdescription
International audience; This paper deals with a debate between Hawtrey, Hicks and Keynes concerning the capacity of the central bank to influence the short-term and the long-term rates of interest. Both Hawtrey and Keynes considered the central bank’s ability to influence short-term rates of interest. However, they do not put the same emphasis on the study of the long-term rates of interest. According to Keynes, long-term rates are influenced by future expected short-term rates (1930, 1936), whereas for Hawtrey (1932, 1937, 1938), long-term rates are more dependent on the business cycle. Short-term rates do not have much effect on long-term rates according to Hawtrey. In 1939, Hicks enters the controversy, giving credit to both Hawtrey’s and Keynes’s theories, and also introducing limits to the operations of arbitrage. He thus presented a nuanced view.
| year | journal | country | edition | language |
|---|---|---|---|---|
| 2018-09-14 |