The relation between Keynesian monetary theory and demand-led growth: a Sraffian exploration

Abstract

This article integrates the Sraffian approach to demand-led growth theory with insights from Keynes’s concept of finance and from the monetary circuit approach. The paper’s first contribution is the extension of Garegnani’s interpretation of Keynes’s General Theory’s originality and limitations to Keynes’s 1937–1938 papers on ‘finance.’ In both cases, it is a question of freeing Keynes from the ties of Marginalist theory. Second, the paper identifies a complementarity between the Keynesian concept of finance, some insights from the monetary circuit, and the role attributed by the Sraffian take of demand-led growth to the autonomous components of demand, which are also Kalecki’s external markets. Finally, the authors propose a subsidiary role for the liquidity-preference theory in the context of the determination of the structure of interest rates, given the short-term base rate set by monetary authorities.