The Keynesian multiplier, liquidity preference and endogenous money

Abstract

An extension of Meade’s (1993) process analysis diagram is used to analyse the consequences of investment expenditure financed by credit-money, and to comment on the Keynesian multiplier theory recently challenged by Moore (1988), on Keynes’s theory of the revolving fund of investment finance and endogenous money as analysed by Davidson (1968), and on the debate initiated by Asimakopulos (1983) about whether liquidity preference and inadequate saving can restrict investment. This leads to an analysis of the issues recently debated by Cottrell (1994) and Moore (1994) about the compatibility of post Keynesian theories of the multiplier, liquidity preference and endogenous money.