scholarly journals Journal of the History of Economic Thought Preprints - Limits to Arbitrage and Interest Rates: A Debate Between Keynes, Hawtrey and Hicks

2018 ◽  
Author(s):  
Lucy BRILLANT
Keyword(s):  
Business Cycle ◽  
Central Bank ◽  
Interest Rates ◽  
Economic Thought ◽  
History Of Economic Thought ◽  
Short Term ◽  
Limits To Arbitrage ◽  
History Of ◽  
The Business Cycle

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.

LIMITS TO ARBITRAGE AND INTEREST RATES: A DEBATE AMONG KEYNES, HAWTREY, AND HICKS

2018 ◽  
Vol 40 (3) ◽  
pp. 335-351 ◽  
Author(s):  
Lucy Brillant
Keyword(s):  
Business Cycle ◽  
Central Bank ◽  
Interest Rates ◽  
Short Term ◽  
John Maynard Keynes ◽  
Limits To Arbitrage ◽  
The Business Cycle

This paper deals with a debate among Ralph George Hawtrey, John Richard Hicks, and John Maynard 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] 1962, 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.

scholarly journals Macroeconomic Synchronization Between G3 Countries

2002 ◽  
Vol 3 (2) ◽  
pp. 137-153 ◽  
Author(s):  
Amado Peirό
Keyword(s):  
Business Cycle ◽  
Interest Rates ◽  
Short Term ◽  
The Us ◽  
Production Prices ◽  
Over Time

AbstractThis paper studies the existence of a world business cycle by examining quarterly and annual comovements in production, prices and interest rates in the three main world economies: Germany, Japan and the US. In accordance with earlier studies, contemporaneous relationships clearly dominate short-term dynamics. The evidence indicates the existence of strong comovements in prices and long-term interest rates, and, to a lesser degree, in GDP and short-term interest rates. They are, however, rather unstable over time.

scholarly journals Journal of the History of Economic Thought Preprints - Keynes, Public Debt and the Complex of Interest Rates

2018 ◽  
Author(s):  
Anthony Aspromourgos
Keyword(s):  
Interest Rates ◽  
Term Structure ◽  
Public Debt ◽  
Public Investment ◽  
Private Investment ◽  
Economic Thought ◽  
History Of Economic Thought ◽  
John Maynard Keynes ◽  
History Of ◽  
Debt Market

John Maynard Keynes consistently offered qualified endorsement of Abba Lerner’s “functional finance” doctrine – the qualifications particularly turning on Keynes’s attentiveness to policy management of the psychology of the debt market. This article examines Keynes’s understanding of the possible influence of public debt on interest rates, from 1930 forward. With the multiplier a mechanism whereby debt-financed public investment generates matching private saving (net of private investment) plus public saving, it becomes possible for Keynes to conclude that increasing public debt need not place upward pressure on the level of interest rates, so long as policy can successfully manage the psychology of the debt market. This particularly concerns long interest rates and hence, the term structure of rates. His theory of the term structure enables Keynes’s conviction that policy can manage and shape long rates. The conclusion considers also whether Keynes’s caution concerning public debt and interest rates retains relevance today.

My Work as a Historian of Economic Thought

1996 ◽  
Vol 18 (1) ◽  
pp. 37-75 ◽  
Author(s):  
Warren J. Samuels
Keyword(s):  
Economic Thought ◽  
History Of Economic Thought ◽  
Role Of Government ◽  
Economic Role ◽  
Professional Activities ◽  
History Of ◽  
History Of Political Economy ◽  
Synergistic Relationship

My work as a historian of economic thought and methodologist has had several dimensions. One comprises a heavy research program. Another involves some major editing projects, several long term. Still another involves a synergistic relationship between my work on the history of economic thought and methodology and on the economic role of government. Another involves my participation in the founding and operation of bothHistory of Political Economyand the History of Economics Society. If all this sounds like a lot of activity, it must be understood that my research and professional activities have been both my vocation and principal avocation. I use the word “work” in the title reluctantly and where others might say “career.” I have never thought of my professional activities as either toil or a career; indeed, I have both engaged in and seen them as a joyful adventure—so much for the theory of the marginal disutility of labor! Especially important has been the continued support of my wife, Sylvia. She has not only understood and supported, albeit sometimes with difficulty, my time-consuming involvement with intellectual work, she has nurtured a wonderful family life.

scholarly journals Monetary and fiscal policy mix connectivity towards the business cycle in Indonesia

2021 ◽  
Vol 9 (2) ◽  
pp. 139-152
Author(s):  
Regina Niken Wilantari ◽  
Imro'atul Husna Afriani
Keyword(s):  
Fiscal Policy ◽  
Business Cycle ◽  
Exchange Rates ◽  
Money Supply ◽  
Series Data ◽  
Policy Mix ◽  
Short Term ◽  
The Business Cycle ◽  
Monetary And Fiscal Policy

This research is based on the magnitude of the influence of monetary and fiscal aspects, namely the money supply, exchange rates, government spending, and taxes on the business cycle in Indonesia. This study aims to examine the effect of the connection between the monetary and fiscal policy mix on the business cycle in Indonesia. For analysis purposes, secondary data was used in the form of time-series data from 1970–2017. The method used is the Vector Error Correction Model (VECM) to see long-term and short-term relationships. In the estimation results, it is found that in the long-term period, the monetary variables (money supply and exchange rates) and fiscal variables (government expenditures and taxes) have a significant positive effect on the business cycle in Indonesia.In contrast, the monetary variables that have a significant effect in the short-term period are only the amount variable money supply. There are no fiscal variables that have a significant effect on the business cycle in Indonesia. The interaction of monetary and fiscal policies is still effectively implemented in Indonesia.

Politics, Independence, and Retirees

2018 ◽  
Author(s):  
Peter Conti-Brown
Keyword(s):  
Interest Rates ◽  
Central Banks ◽  
Central Banking ◽  
Time Inconsistency ◽  
Short Term ◽  
2016 Election ◽  
Low Interest Rates ◽  
The Face ◽  
History Of

Until recently, it was widely believed that central banks must protect people from their own worst instincts: the populace demands easy money and low interest rates, and a politically sensitive representative class will give it to them. Central banks have the responsibility of resolving this time inconsistency problem by protecting the long-term value of the currency even against the short term demands of politics. Yet the financial crisis of 2008 and the 2016 election have changed this narrative. This chapter explores how this new political economy of central banking, in the face of long-term low interest rates, changes the posture of central banks against the rest of the polity. It discusses some history of political pressures against central banks in other climates and makes predictions about how the ‘new normal’ of lower interest rates will challenge the Fed’s ability to stay above the political fray, despite its best intentions.

scholarly journals Tax Competition, Investment Irreversibility and the Provision of Public Goods

2015 ◽  
Vol 16 (4) ◽  
pp. 408-421 ◽  
Author(s):  
Michele Moretto ◽  
Sergio Vergalli ◽  
Paolo M. Panteghini
Keyword(s):  
Business Cycle ◽  
Public Goods ◽  
Tax Competition ◽  
Capital Accumulation ◽  
Business Risk ◽  
Short Term ◽  
The Business Cycle ◽  
Changes Over Time ◽  
Over Time

AbstractThis article studies the effects of tax competition on the provision of public goods under business risk and partial irreversibility of investment. As will be shown, the provision of public goods changes over time and also depends on the business cycle. In particular, under source-based taxation, in the short term, public goods can be optimally provided during a downturn. The converse is true during a recovery: in this case, they are underprovided. In the long term, however, tax competition does not affect capital accumulation. This means that the provision of public goods is unaffected by taxation.

Measuring the Sensitivity of Net Interest Paid to the Business Cycle and to Inflation

1987 ◽  
Vol 15 (3) ◽  
pp. 235-258 ◽  
Author(s):  
Thomas M. Holloway
Keyword(s):  
Business Cycle ◽  
Interest Rates ◽  
Analytical Framework ◽  
Budget Deficits ◽  
Factors Affecting ◽  
Short Run ◽  
Sample Application ◽  
Federal Debt ◽  
The Business Cycle

Net interest paid has been one of the most rapidly growing components of federal government expenditures since 1970. Unlike other components of the budget, public policy actions can have little effect on its rise—especially in the short run. For this reason, it is important to examine the forces “automatically” affecting net interest paid. This article examines the sources of change in net interest paid and provides an analytical framework to estimate the automatic effects of the business cycle and inflation. The framework incorporates the most important factors affecting net interest paid, including interest rates, budget deficits, and outstanding stocks (short-term and long-term debt and direct loans), and highlights the simultaneous relationship between net interest paid and changes in net debt (federal debt outstanding less direct loans outstanding). A sample application of the analytical framework is discussed.

scholarly journals Joint Dynamics Of The U.S. Treasury Maturity Rates: Policy Implications For Central Banks

2011 ◽  
Vol 9 (5) ◽  
pp. 1
Author(s):  
Omid Sabbaghi
Keyword(s):  
Central Bank ◽  
Interest Rates ◽  
Multivariate Time Series ◽  
Policy Implications ◽  
Impulse Responses ◽  
Short Term ◽  
Treasury Market ◽  
Short Horizon ◽  
The U.S

This paper examines whether there is a direct relationship between yields of differing maturities for the U.S. Treasury market. The hypothesis that long horizon rates may help to predict future short horizon rates, in addition to short horizon rates helping to predict future long horizon rates, provides the motivation for the present study. The proposed inter-relationship between the different interest rates exhibits important implications for central bank policy-making. Employing a multivariate time-series analysis, we find that spreads in the short-term rate tend to rise (fall) in response to rises in prior short-term (long-term) rate spreads. Additionally, spreads in the long term rates tend to decrease in response to prior rises in the 1 year Treasury rate spread. Finally, positive impulse responses for long term spreads largely derive from shocks to shorter term maturity spreads, while shocks to longer term maturity rates result in gradual negative impulse responses for maturity rates of shorter horizons. In sum, this paper provides evidence of important feedback relationships across the maturity spectrum in the U.S. Treasury market. An understanding of the maturity rate dynamics is crucial for future central bank interventions and for the pricing of options and other related financial instruments.

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