Keynesian Theory Challenges Loanable Funds Theory, Revealing Non-Neutrality of Money
The loanable funds theory is important in understanding how central banks use interest rates to control inflation. Some economists, like Woodford and New Keynesians, still refer to this theory. However, Keynes criticized it for not considering the non-neutrality of money. By analyzing different viewpoints, it is possible to develop a Keynesian theory of credit that highlights the impact of money on the economy.