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In the loanable funds theory, the interest rate serves as a balancing factor between the savings offered for loans and the funds borrowed for investment. In Keynes’s theory, by contrast, it is a monetary phenomenon that balances the demand and the supply of money. At first glance, the monetary phenomenon of the interest rate may seem quite different and is often considered groundbreaking and revolutionary. In Keynes’s theory, people hold part of their savings in money to cope with uncertainty about the returns from long-term bonds, and it is savings held in money that leads the interest rate to be a monetary phenomenon. While people hold part of their savings in money, they also invest their savings by purchasing long-term bonds. The interest rate also balances savings offered, though only in part and not the whole, and funds borrowed in the bond market, as in the loanable funds theory. In this regard, Keynes’s theory and the loanable funds theory are not as strikingly different as it may first appear. The main exegetical work of Keynes’s ideas is Keynesian economics. In this theory, the interest rate is also a monetary phenomenon, as is expected of exegetical work. However, it is not due to savings held in money as in Keynes’s theory; rather, it is due to the cash holdings required for purchasing goods and services. This paper examines the differences among these three interest rate theories, the reasons behind them, and their practical implications.    

This study investigates the validity of Thirlwall’s Law in Nigeria, examining whether balance-of-payments constraints affects economic growth in Nigeria. Utilizing annual data from 1980 to 2020, the analysis employs an autoregressive distributed lag (ARDL) model to estimate the income elasticity of imports and tests for cointegration to verify long-term equilibrium relationships. Findings reveal that Nigeria’s income elasticity of import demand exceeds unity, suggesting that income growth significantly heightens import dependency, which exacerbates balance-of-payments pressures. The results confirm Thirlwall’s hypothesis, indicating that Nigeria’s growth is constrained by its current account position. This study contributes to the literature by applying Thirlwall’s Law to a resource-dependent developing economy with high import reliance and limited export diversification. Key policy recommendations include the adoption of an import-substitution strategy to bolster domestic production in high-demand sectors, alongside export diversification efforts to reduce external dependency. These findings underscore the urgent need for structural reforms to stabilize the balance of payments and promote sustainable economic growth in Nigeria.

Adam Smith being its founder, in the Classical School, which gives prominence to supply and adopts an approach of unbiased finance, the economy is always in a state of full employment equilibrium. In this system of thought, the main philosophy of which is budget balance, that asserts that there is flexibility between prices and wages and regards public debt as an extraordinary instrument, the interference of the state with the economic and social life is frowned upon. In line with the views of the classical thought, the classical fiscal policy is based on three basic assumptions. These are the "Consumer State Assumption", the assumption accepting that "Public Expenditures are Always Ineffectual" and the assumption concerning the "Impartiality of the Taxes and Expenditure Policies Implemented by the State". On the other hand, the Keynesian School founded by John Maynard Keynes, gives prominence to demand, adopts the approach of functional finance, and asserts that cases of underemployment equilibrium and over-employment equilibrium exist in the economy as well as the full employment equilibrium, that problems cannot be solved through the invisible hand, that prices and wages are strict, the interference of the state is essential and at this point fiscal policies have to be utilized effectively.Keynesian fiscal policy depends on three primary assumptions. These are the assumption of "Filter State", the assumption that "public expenditures are sometimes effective and sometimes ineffective or neutral" and the assumption that "the tax, debt and expenditure policies of the state can never be impartial".