Limits to Arbitrage and Interest Rates: a Debate Between Keynes, Hawtrey and Hicks

Abstract : 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.
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https://hal-univ-bourgogne.archives-ouvertes.fr/hal-01696253
Contributeur : Lucy Brillant <>
Soumis le : mardi 30 janvier 2018 - 11:30:18
Dernière modification le : jeudi 7 février 2019 - 16:24:24

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  • HAL Id : hal-01696253, version 1

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Lucy Brillant. Limits to Arbitrage and Interest Rates: a Debate Between Keynes, Hawtrey and Hicks. Journal of the History of Economic Thought, Cambridge University Press, 2018, Volume 40 (Issue 3), pp.335-351. ⟨hal-01696253⟩

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