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Autor:innen: 
Erscheinungsjahr: 
2009
Schriftenreihe/Nr.: 
Jena Economic Research Papers No. 2009,085
Verlag: 
Friedrich Schiller University Jena and Max Planck Institute of Economics, Jena
Zusammenfassung: 
One of Keynes' core issues in his liquidity preference theory is how fundamental uncertainty affects the propensity to hold money as a liquid asset. The paper critically assesses various formal representations of fundamental uncertainty and provides an argument for a more boundedly rational approach to portfolio choice between liquidity and risky assets. The choice is made on the basis of individual beliefs which are subject to mental representations of the underlying economic structure. Self-consciousness arises when the agent is aware of the fact that beliefs are dispersed among agents due to the absence of a true model. Responding to this fact by increasing liquidity preference is rationalized by the higher ex post performance of choice. Moreover, we analyze the case that the portfolio is partially financed by debt. It is explored how fundamental uncertainty affects the volume of the portfolio and hence money and credit demand as well as the probability of debt failures.
Schlagwörter: 
liquidity preference
portfolio choice
self-confidence
self-consciousness
fundamental uncertainty
bounded rationality
Keynes
Knight
JEL: 
G11
D81
E41
B31
Dokumentart: 
Working Paper

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