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Cambridge Journal of Economics Advance Access published online on January 4, 2006
Cambridge Journal of Economics, doi:10.1093/cje/bei104
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© The Author 2005. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved.
Received April 19, 2004
Revised June 28, 2005

Article

Keynes's theory of liquidity preference and his debt management and monetary policies

Geoff Tily 1 *

1 12 Copthorne Ave., London SW12 OJZ

* To whom correspondence should be addressed.
Geoff Tily, E-mail: geoff.tily{at}ons.gov.uk


  Abstract

This paper seeks to bolster the view that Keynes was a monetary economist concerned primarily with monetary and not fiscal policy. His most fundamental policy conclusion for national economies was that the authorities could control the long-term rate of interest and should do so to promote investment, growth and employment. Keynes's theory of liquidity preference is presented as a theory of money as a store of value that leads to this fundamental policy conclusion. The theory is then applied to explain the debt management, monetary and international financial policies that were adopted in World War II.

Keywords: Keynes; Keynesians; Liquidity preference; Long-term rate of interest; Debt management policy.
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