Reconsidering the Investment-Profit Nexus in Finance-Led Economies: an ARDL-Based Approach
AbstractA simple Post Keynesian growth model is developed, in which financial variables are explicitly taken into account. Different possible accumulation regimes are derived with respect to changes of these variables. Several variants of an investment function are estimated econometrically. The ARDL-based approach proposed by Pesaran et al. (2001) is argued to be superior for this purpose to the traditional cointegration approach. The econometric results are discussed with respect to a remarkable phenomenon that can be observed for some important OECD countries since the early 1980s: accumulation has generally been declining while profit rates have shown a tendency to rise. The author concentrates on one potential explanation of this phenomenon which is particularly relevant for the USA and relies on the hypothesis of a high propensity to consume out of capital income. The paper also gives an alternative explanation of the so-called "New Economy boom" in the USA at the end of the 1990s.
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Bibliographic InfoPaper provided by IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute in its series IMK Working Paper with number 01-2007.
Length: 33 pages
Date of creation: Jan 2007
Date of revision:
Investment; Profitability; Financialisation; Time Series Econometrics.;
Other versions of this item:
- Till van Treeck, 2008. "Reconsidering The Investment-Profit Nexus In Finance-Led Economies: An Ardl-Based Approach," Metroeconomica, Wiley Blackwell, vol. 59(3), pages 371-404, 07.
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
- E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
- E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
- G3 - Financial Economics - - Corporate Finance and Governance
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-02-17 (All new papers)
- NEP-MAC-2007-02-17 (Macroeconomics)
- NEP-PKE-2007-02-17 (Post Keynesian Economics)
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- Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
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