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The Monetization of Profits in a Monetary Circuit Framework

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  • Eladio Febrero

Abstract

This paper offers an explanation of the realization of profits in money. Following Edward Nell's lead, we place Marx's spheres of production and circulation at the centre of the analysis. Production is represented a la Sraffa-von Neumann while circulation is analysed following the basic insights of the Franco-Italian theory of the monetary circuit. Once production has taken place, money is created by banks ex nihilo and then circulates through certain channels allowing the reproduction of the system and monetizing profits plus the payment of interest on long-term debts within one single circuit. The novelty of our approach lies in the treatment of the financing of investment in fixed capacity.

Suggested Citation

  • Eladio Febrero, 2008. "The Monetization of Profits in a Monetary Circuit Framework," Review of Political Economy, Taylor & Francis Journals, vol. 20(1), pages 111-125.
    • Handle: RePEc:taf:revpoe:v:20:y:2008:i:1:p:111-125
    DOI: 10.1080/09538250701662002
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    References listed on IDEAS

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    1. Paul Davidson, 2002. "Financial Markets, Money and the Real World," Books, Edward Elgar Publishing, number 2467.
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    Cited by:

    1. Sergio Cesaratto, 2016. "La financiación inicial y final en el circuito monetario y la teoría de la demanda efectiva," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 18(35), pages 47-78, July-Dece.
    2. repec:bas:econth:y:2013:i:1:p:15-25 is not listed on IDEAS
    3. Guglielmo Forges Davanzati, 2014. "Unemployment benefits, the 'added worker effect' and income distribution in a monetary economy," Working Papers PKWP1402, Post Keynesian Economics Society (PKES).
    4. repec:bas:econth:y:2013:i:1:p:3-14 is not listed on IDEAS
    5. Sergio Cesaratto, 2016. "When Robertson was Keynesian and Keynes Robertsonian: a discussion between D.H.R. and J.M.K. in the early 1930s and the problems with the Monetary Circuit Theory. A note," Department of Economics University of Siena 732, Department of Economics, University of Siena.
    6. Sergio Cesaratto, 2017. "Initial and Final Finance in the Monetary Circuit and the Theory of Effective Demand," Metroeconomica, Wiley Blackwell, vol. 68(2), pages 228-258, May.

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