Krugman’s 1998 seminal model that revived the liquidity trap theory stimulated a debate on its origins in and differences with respect to Keynes and Hicks’s insights. The present paper illustrates and comments on a neglected line of thought innervating Krugman’s model, which hinges on the presence of a negative natural rate of interest. This result is argued to ensue from theoretical premises analogous to those present in Samuelson’s 1958 article on the overlapping generations model. In turn, Samuelson obtained a negative equilibrium interest rate by opportunely recasting Böhm-Bawerk’s three causes for a positive rate of interest.

DI BUCCHIANICO, S. (2020). A neglected route to Krugman's liquidity trap revival. In A neglected route to Krugman's liquidity trap revival (pp. 1-19). Roma : Centro di Ricerche e Documentazione "Piero Sraffa".

A neglected route to Krugman's liquidity trap revival

Stefano Di Bucchianico
2020-01-01

Abstract

Krugman’s 1998 seminal model that revived the liquidity trap theory stimulated a debate on its origins in and differences with respect to Keynes and Hicks’s insights. The present paper illustrates and comments on a neglected line of thought innervating Krugman’s model, which hinges on the presence of a negative natural rate of interest. This result is argued to ensue from theoretical premises analogous to those present in Samuelson’s 1958 article on the overlapping generations model. In turn, Samuelson obtained a negative equilibrium interest rate by opportunely recasting Böhm-Bawerk’s three causes for a positive rate of interest.
2020
DI BUCCHIANICO, S. (2020). A neglected route to Krugman's liquidity trap revival. In A neglected route to Krugman's liquidity trap revival (pp. 1-19). Roma : Centro di Ricerche e Documentazione "Piero Sraffa".
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11365/1118266