Liquidity preference

This article is about liquidity preference in macroeconomic theory. For other uses, see Liquidity preference (Venture capital).

In macroeconomic theory, liquidity preference refers to the demand for money, considered as liquidity. The concept was first developed by John Maynard Keynes in his book The General Theory of Employment, Interest and Money (1936) to explain determination of the interest rate by the supply and demand for money.

Criticisms

Murray Rothbard denied Keynes' theory of liquidity preference. In his book America's Great Depression, Rothbard argued that interest rates are instead determined solely by time preference.

See also

• Diamond–Dybvig model
• Liquidity trap
• Money demand

References

• Gauti B. Eggertsson (2008). "liquidity trap," The New Palgrave Dictionary of Economics, 2nd Edition.
• Carlo Panico (2008). "liquidity preference," The New Palgrave Dictionary of Economics, 2nd Edition, Abstract.
• Liquidity Preference Curve