Liquidity Preference, Currency Hierarchies and Economic Cycles: A discussion for Latin American countries adopting the Inflation Targeting Regime.
Key Words: Liquidity Preference, Currency Hierarchies and Economic Cycles:
Keynes' postulates of uncertainty and liquidity preference were very important to think about a monetary economy of production. Based on Keynesian and post Keynesian theories, this paper analyzes how the preference for liquidity impacts the countries through the hierarchy of money. The preference for liquidity that at times of global crisis impacts countries differently, intensifying or relaxing the effects of the crisis according to the condition of each country in the global economic structure. Since economic agents always behave in search of reducing their risks and losses, and therefore in times of declines in the world economy agents seek to allocate their income in assets with greater liquidity and since currency is the asset with the highest degree of liquidity, allocating their resources in currency turns out to be the safest. Therefore, monetary policies can influence the trends of instability in countries.