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'Financialisation' in Post-Keynesian models of distribution and growth - a systematic review

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Author Info
Eckhard Hein () (IMK at the Hans Boeckler Foundation and Carl von Ossietzky University Oldenburg, Germany)
Till van Treeck () (IMK at the Hans Boeckler Foundation)

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Abstract

We review recent attempts to integrate 'financialisation' processes into Post-Keynesian distribution and growth models and distinguish three principal channels of influence: 1. objectives and finance restrictions of firms, 2. new opportunities for households' wealth-based and debt-financed consumption, and 3. distribution between capital and labour, on the one hand, and between management and workers on the other hand. Starting from a re-interpretation of the Post-Keynesian theory of the firm we bridge the gap between micro- and macro-analysis of 'financialisation' and we trace the main characteristics and effects of 'financialisation' from the micro to the macro level taking into account stock-flow interactions. Our review of the theoretical literature on 'financialisation' shows that expansive effects may arise under certain conditions, in particular when there are strong wealth effects in firms' investment decisions (via Tobin's q) and in households' consumption decisions. However, our review also suggests that even an expansive finance-led economy may build up major financial imbalances, i.e. increasing debt-capital or debt-income ratios, which make such economies prone to financial instability.

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Paper provided by IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute in its series IMK Working Paper with number 10-2008.

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Length: 24 pages
Date of creation: 2008
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Handle: RePEc:imk:wpaper:10-2008

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Related research
Keywords: Financialisation; Post-Keynesian distribution and growth models;

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Find related papers by JEL classification:
E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
E21 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
E22 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
E25 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Amitava Krishna Dutt, 2006. "Maturity, Stagnation And Consumer Debt: A Steindlian Approach," Metroeconomica, Blackwell Publishing, vol. 57(3), pages 339-364, 07. [Downloadable!] (restricted)
  2. Engelbert Stockhammer, 2007. "Some Stylized Facts on the Finance-Dominated Accumulation Regime," Working Papers wp142, Political Economy Research Institute, University of Massachusetts at Amherst. [Downloadable!]
  3. Soon Ryoo & Peter Skott, 2008. "Financialization in Kaleckian Economies with and without Labor Constraints," Intervention. European Journal of Economics and Economic Policies, Metropolis, vol. 5(2), pages 357-386. [Downloadable!] (restricted)
    Other versions:
  4. Engelbert Stockhammer, 2004. "Financialisation and the slowdown of accumulation," Cambridge Journal of Economics, Oxford University Press, vol. 28(5), pages 719-741, September. [Downloadable!] (restricted)
    Other versions:
  5. Engelbert Stockhammer, 2006. "Shareholder value orientation and the investment-profit puzzle," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 28(2), pages 193-215, January. [Downloadable!] (restricted)
  6. Amit Bhaduri & Kazimierz Laski & Martin Riese, 2006. "A Model Of Interaction Between The Virtual And The Real Economy," Metroeconomica, Blackwell Publishing, vol. 57(3), pages 412-427, 07. [Downloadable!] (restricted)
  7. Craig Medlen, 2003. "The trouble with Q," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 25(4), pages 693-698, July. [Downloadable!] (restricted)
  8. Till van Treeck, 2008. "Reconsidering The Investment-Profit Nexus In Finance-Led Economies: An Ardl-Based Approach," Metroeconomica, Blackwell Publishing, vol. 59(3), pages 371-404, 07. [Downloadable!] (restricted)
  9. Eckhard Hein, 2007. "Interest Rate, Debt, Distribution And Capital Accumulation In A Post-Kaleckian Model," Metroeconomica, Blackwell Publishing, vol. 58(2), pages 310-339, 05. [Downloadable!] (restricted)
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  10. Eckhard Hein, 2006. "Interest, Debt and Capital Accumulation--A Kaleckian Approach," International Review of Applied Economics, Taylor and Francis Journals, vol. 20(3), pages 337-352, July. [Downloadable!] (restricted)
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  11. Till van Treeck, 2007. "A Synthetic, Stock-Flow Consistent Macroeconomic Model of Financialisation," IMK Working Paper 06-2007, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute. [Downloadable!]
  12. Peter Skott & Soon Ryoo, 2007. "Macroeconomic implications of financialization," Working Papers 2007-08, University of Massachusetts Amherst, Department of Economics. [Downloadable!]
    Other versions:
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Eckhard Hein, 2008. "Financialisation in a comparative static, stock-flow consistent Post-Kaleckian distribution and growth model," IMK Working Paper 21-2008, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute. [Downloadable!]
  2. Eckhard Hein, 2009. "A (Post-) Keynesian perspective on "financialisation"," IMK Studies 01-2009, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute. [Downloadable!]
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