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Cambridge Journal of Economics 2004 28(6):889-901; doi:10.1093/cje/beh041
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Right arrow E12 - Keynes; Keynesian; Post-Keynesian
Right arrow E25 - Aggregate Factor Income Distribution
Right arrow E43 - Determination of Interest Rates; Term Structure of Interest Rates
Right arrow E51 - Money Supply; Credit; Money Multipliers
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Cambridge Journal of Economics, Vol. 28, No. 6, © Cambridge Political Economy Society 2004; all rights reserved

Rate of profit and interest in a growth theory with endogenous money

Kazuhiro Kurose*

Address for correspondence: Graduate School of Economics and Business Administration, Hokkaido University, Kita 9 Nishi 7, Kita-Ku, Sapporo, Japan, email: kurose{at}pop.econ.hokudai.ac.jp

This paper attempts to incorporate an endogenous money approach into post-Keynesian growth theory in order to derive the full employment equilibrium rate of interest as well as that of profit. This rate of interest, named the ideal rate of interest, differs from the rate of profit in that it is in proportion to a monetary variable, not a real variable. Further, the rate of profit also differs from the rate of interest as a premium because it is productive. The rate of interest could be important in explaining circumstances in which financial capital has been accumulated in excess.

Key Words: Post-Keynesian theory of growth and distribution • Endogenous money supply • Natural rate of growth • Ideal rate of interest

JEL classifications: E12, E43, E51, F21

Manuscript received October 16, 2001; final version received February 11, 2003.


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