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Interest and Profit: An Empirical Assessment of the Monetary Theory of Distribution for the Euro Area

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  • Santiago José Gahn

Abstract

Several authors, especially those who share a Classical–Keynesian point of view, argue that the interest rate determines the rate of profit in the long run. Considering the eleven founding economies of the euro area, I find that, adjusted for the rate of growth of gross national income, there is a positive long-term relationship between the real interest rate and the net rate of profit. The results are confirmed even when I estimate a model with nominal interest rates, inflation, and a yield curve. These results imply that the European Central Bank (ECB), when deciding monetary policy, is not neutral in determining income distribution.

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  • Santiago José Gahn, 2024. "Interest and Profit: An Empirical Assessment of the Monetary Theory of Distribution for the Euro Area," Review of Political Economy, Taylor & Francis Journals, vol. 36(2), pages 685-701, April.
    • Handle: RePEc:taf:revpoe:v:36:y:2024:i:2:p:685-701
    DOI: 10.1080/09538259.2022.2062959
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