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The political economy debate on ‘financialisation’ – a macroeconomic perspective

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  • Till van Treeck

    ()
    (IMK at the Hans Boeckler Foundation)

Abstract

A number of important contributions to the political economy literature have argued that changes in the financial sector have been amongst the main reflections, or even the driving forces, of recent transformations of capitalism in the rich countries. This hypothesis has been referred to as 'financialisation'. We argue in this article that the interdisciplinary literature could be enriched if the macroeconomic dimension of financialisation was more explicitly taken into account. In particular, important macroeconomic constraints regarding the determination of profits, in the face of a decreasing importance of physical investment and an increased importance of financial operations, are often not explicitly considered. We compare our macroeconomic approach with contributions from different strands in the existing literature, including empirical analyses of new patterns of profit generation, the 'varieties of capitalism' approach, the British 'social accounting' literature, and the French 'regulationist' literature. Our theoretical framework is illustrated by means of an empirical comparison of the effects of financialisation in the USA and in Germany.

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Bibliographic Info

Paper provided by IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute in its series IMK Working Paper with number 01-2008.

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Length: 31 pages
Date of creation: 2008
Date of revision:
Handle: RePEc:imk:wpaper:01-2008

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Related research

Keywords: Financialisation; political economy; varieties of capitalism; social accounting; regulationism;

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References

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  1. Peter Skott & Soon Ryoo, 2007. "Macroeconomic implications of financialization," UMASS Amherst Economics Working Papers, University of Massachusetts Amherst, Department of Economics 2007-08, University of Massachusetts Amherst, Department of Economics.
  2. Till van Treeck, 2007. "A Synthetic, Stock-Flow Consistent Macroeconomic Model of Financialisation," IMK Working Paper, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute 06-2007, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
  3. Eckhard Hein & Achim Truger, 2005. "What ever happened to Germany? Is the decline of the former European key currency country caused by structural sclerosis or by macroeconomic mismanagement?," Macroeconomics, EconWPA 0501007, EconWPA.
  4. Vitols, Sigurt, 2001. "The origins of bank-based and market-based financial systems: Germany, Japan, and the United States," Discussion Papers, Research Unit: Economic Change and Employment, Social Science Research Center Berlin (WZB) FS I 01-302, Social Science Research Center Berlin (WZB).
  5. Mayer, Colin, 1987. "New Issues in Corporate Finance," CEPR Discussion Papers, C.E.P.R. Discussion Papers 181, C.E.P.R. Discussion Papers.
  6. Laurence Boone & Claude Giorno & Pete Richardson, 1998. "Stock Market Fluctuations and Consumption Behaviour: Some Recent Evidence," OECD Economics Department Working Papers 208, OECD Publishing.
  7. George A. Akerlof, 2007. "The Missing Motivation in Macroeconomics," American Economic Review, American Economic Association, American Economic Association, vol. 97(1), pages 5-36, March.
  8. Marc Lavoie, 1994. "A Post Keynesian Approach to Consumer Choice," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., M.E. Sharpe, Inc., vol. 16(4), pages 539-562, July.
  9. Henry G. Manne, 1965. "Mergers and the Market for Corporate Control," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 73, pages 351.
  10. Engelbert Stockhammer, 2000. "Financialization and the Slowdown of Accumulation," Working Papers, Vienna University of Economics Research Group: Growth and Employment in Europe: Sustainability and Competitiveness geewp14, Vienna University of Economics Research Group: Growth and Employment in Europe: Sustainability and Competitiveness.
  11. Corbett, Jenny & Jenkinson, Tim, 1997. "How Is Investment Financed? A Study of Germany, Japan, the United Kingdom and the United States," The Manchester School of Economic & Social Studies, University of Manchester, University of Manchester, vol. 65(0), pages 69-93, Supplemen.
  12. Till van Treeck, 2007. "Reconsidering the Investment-Profit Nexus in Finance-Led Economies: an ARDL-Based Approach," IMK Working Paper, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute 01-2007, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
  13. Engelbert Stockhammer, 2006. "Shareholder value orientation and the investment-profit puzzle," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., M.E. Sharpe, Inc., vol. 28(2), pages 193-215, January.
  14. Michael C. Jensen, 2005. "Agency Costs of Overvalued Equity," Financial Management, Financial Management Association, Financial Management Association, vol. 34(1), Spring.
  15. Fama, Eugene F, 1980. "Agency Problems and the Theory of the Firm," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 88(2), pages 288-307, April.
  16. James Crotty, 2005. "The Neoliberal Paradox: The Impact of Destructive Product Market Competition and Impatient Finance on Nonfinancial Corporations in the Neoliberal Era," Research Briefs, Political Economy Research Institute, University of Massachusetts at Amherst rb2003-5, Political Economy Research Institute, University of Massachusetts at Amherst.
  17. Henry G. Manne, 1965. "Mergers and the Market for Corporate Control," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 73, pages 110.
  18. Graham, John R. & Harvey, Campbell R. & Rajgopal, Shiva, 2005. "The economic implications of corporate financial reporting," Journal of Accounting and Economics, Elsevier, Elsevier, vol. 40(1-3), pages 3-73, December.
  19. Amit Bhaduri & Kazimierz Laski & Martin Riese, 2006. "A Model Of Interaction Between The Virtual And The Real Economy," Metroeconomica, Wiley Blackwell, Wiley Blackwell, vol. 57(3), pages 412-427, 07.
  20. Engelbert Stockhammer, 2007. "Some Stylized Facts on the Finance-Dominated Accumulation Regime," Working Papers, Political Economy Research Institute, University of Massachusetts at Amherst wp142, Political Economy Research Institute, University of Massachusetts at Amherst.
  21. Lavoie, Marc, 2004. "Post Keynesian consumer theory: Potential synergies with consumer research and economic psychology," Journal of Economic Psychology, Elsevier, Elsevier, vol. 25(5), pages 639-649, October.
  22. Eckhard Hein & Till van Treeck, 2007. "'Financialisation' in Kaleckian/Post-Kaleckian models of distribution and growth," IMK Working Paper, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute 07-2007, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
  23. Massimo Guidolin & Elizabeth A. La Jeunesse, 2007. "The decline in the U.S. personal saving rate: is it real and is it a puzzle?," Review, Federal Reserve Bank of St. Louis, Federal Reserve Bank of St. Louis, issue Nov, pages 491-514.
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Citations

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Cited by:
  1. Hein, Eckhard, 2011. "Distribution, ‘Financialisation’ and the Financial and Economic Crisis – Implications for Post-crisis Economic Policies," MPRA Paper 31180, University Library of Munich, Germany.
  2. IANCU, Aurel, 2013. "Extending Financialisation and Increasing Fragility of the Financial System," Working Papers of National Institute of Economic Research, National Institute of Economic Research 130307, National Institute of Economic Research.
  3. Eckhard Hein & Till van Treeck, 2008. "'Financialisation' in Post-Keynesian models of distribution and growth - a systematic review," IMK Working Paper, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute 10-2008, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
  4. Hein, Eckhard, 2012. "Finance-dominated capitalism, re-distribution and the financial and economic crises: A European perspective," IPE Working Papers, Berlin School of Economics and Law, Institute for International Political Economy (IPE) 14/2012, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
  5. Hein, Eckhard, 2009. "Financialisation', distribution, capital accumulation and productivity growth in a Post-Kaleckian model," IPE Working Papers, Berlin School of Economics and Law, Institute for International Political Economy (IPE) 01/2009, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
  6. Eckhard Hein, 2009. "A (Post-) Keynesian perspective on "financialisation"," IMK Studies 01-2009, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
  7. Engelbert Stockhammer, 2010. "Financialization and the Global Economy," Working Papers, Political Economy Research Institute, University of Massachusetts at Amherst wp240, Political Economy Research Institute, University of Massachusetts at Amherst.
  8. Eckhard Hein, 2010. "Shareholder Value Orientation, Distribution And Growth-Short- And Medium-Run Effects In A Kaleckian Model," Metroeconomica, Wiley Blackwell, Wiley Blackwell, vol. 61(2), pages 302-332, 05.
  9. Jan Toporowski, 2012. "Neologism as Theoretical Innovation in Economics: The case of 'Financialisation'," Working Papers, Department of Economics, SOAS, University of London, UK 171, Department of Economics, SOAS, University of London, UK.
  10. Eckhard Hein, 2012. "Finance-dominated capitalism, re-distribution, household debt and financial fragility in a Kaleckian distribution and growth model," PSL Quarterly Review, Economia civile, Economia civile, vol. 65(260), pages 11-51.
  11. Eckhard Hein, 2013. "The crisis of finance-dominated capitalism in the euro area, deficiencies in the economic policy architecture, and deflationary stagnation policies," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., M.E. Sharpe, Inc., vol. 36(2), pages 325-354, January.
  12. Georgios Argitis & Stella Michopoulou, 2011. "Are Full Employment and Social Cohesion Possible Under Financialization?," Forum for Social Economics, Springer, Springer, vol. 40(2), pages 139-155, July.
  13. Eckhard Hein, 2013. "Finance-dominated Capitalism and Redistribution of Income: A Kaleckian Perspective," Economics Working Paper Archive, Levy Economics Institute wp_746, Levy Economics Institute.
  14. Hein, Eckhard & Truger, Achim, 2010. "Finance-dominated capitalism in crisis: The case for a Global Keynesian New Deal," IPE Working Papers, Berlin School of Economics and Law, Institute for International Political Economy (IPE) 06/2010, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
  15. Spanò , Marcello, 2013. "Please do not shoot the wrong enemy!," Working Papers 31/2013, Universidade Portucalense, Centro de Investigação em Gestão e Economia (CIGE).

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