ABSTRACT
Soon after the appearance of Keynes' General Theory, an article was published by Bertil Ohlin contrasting Keynes' liquidity preference theory with the Swedish theory of ioanable funds, according to which the interest rate is determined by supply and demand in the market for credit. Ohlin's paper initiated a debate on the relative merits of the two theories, and on the question whether both theories might, in fact, be saying the same thing.1 After a first flare-up of the discussion in 1937, the year Ohlin's paper was published, contributions have continued to appear, though at a somewhat slower rate, up to the present day. Although more than a quarter of a century has passed since the question as to the equivalence of the two theories was first raised, no answer has as yet found general acceptance. One of the reasons is that the controversy broadened into a discussion about the much more fundamental problem whether theorizing in terms of "stocks" would lead to the same results as theorizing in terms of"flows". As a rule the liquidity preference theory has been classified as a "stock" theory and the loanable funds theory as a "flow" theory.
