Investment, Financial Markets, and Uncertainty
AbstractThis paper provides a theoretical explanation of the accumulation process, which accounts for the developments in the financial markets over the recent past. Specifically, our approach is focused on the presence of correlations between physical and financial investment, and how the latter could affect the former. In order to achieve this objective, two assets are considered: equities and bonds. This choice permits us to account for two extreme alternative possibilities: taking risk in the short run with unknown profits, or undertaking a commitment to the long run with known yields. This proposal also accounts for the influence of the cost of external finance and the impact of financial uncertainty, as proxied by the interest rate in the former case and the exchange rate in the latter case; thereby utilizing the Keynesian notion of conventions in the determination of investment. The model thus formulated is subsequently estimated by applying the difference GMM and the system GMM in a panel of 14 OECD countries from 1970 to 2010.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Levy Economics Institute in its series Economics Working Paper Archive with number wp_743.
Date of creation: Dec 2012
Date of revision:
Contact details of provider:
Web page: http://www.levyinstitute.org
Accumulation; Financial Markets; Conventions; Uncertainty; Keynesian Economics;
Find related papers by JEL classification:
- B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
- E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
This paper has been announced in the following NEP Reports:
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.:
- Alonso-Borrego, Cesar & Arellano, Manuel, 1999. "Symmetrically Normalized Instrumental-Variable Estimation Using Panel Data," Journal of Business & Economic Statistics, American Statistical Association, vol. 17(1), pages 36-49, January.
- Soon Ryoo & Peter Skott, 2008.
"Financialization in Kaleckian Economies with and without Labor Constraints,"
European Journal of Economics and Economic Policies: Intervention,
Edward Elgar, vol. 5(2), pages 357-386.
- Soon Ryoo & Peter Skott, 2008. "Financialization in Kaleckian economies with and without labor constraints," UMASS Amherst Economics Working Papers 2008-05, University of Massachusetts Amherst, Department of Economics.
- R Blundell & Steven Bond, .
"Initial conditions and moment restrictions in dynamic panel data model,"
W14&104., Economics Group, Nuffield College, University of Oxford.
- Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
- Blundell, R. & Bond, S., 1995. "Initial Conditions and Moment Restrictions in Dynamic Panel Data Models," Economics Papers 104, Economics Group, Nuffield College, University of Oxford.
- Richard Blundell & Steve Bond, 1995. "Initial conditions and moment restrictions in dynamic panel data models," IFS Working Papers W95/17, Institute for Fiscal Studies.
- Pasaran, M.H. & Im, K.S. & Shin, Y., 1995.
"Testing for Unit Roots in Heterogeneous Panels,"
Cambridge Working Papers in Economics
9526, Faculty of Economics, University of Cambridge.
- M Arellano & O Bover, 1990.
"Another Look at the Instrumental Variable Estimation of Error-Components Models,"
CEP Discussion Papers
dp0007, Centre for Economic Performance, LSE.
- Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
- Bhaduri, Amit & Marglin, Stephen, 1990. "Unemployment and the Real Wage: The Economic Basis for Contesting Political Ideologies," Cambridge Journal of Economics, Oxford University Press, vol. 14(4), pages 375-93, December.
- Thomas Dallery & Till van Treeck, 2011. "Conflicting Claims and Equilibrium Adjustment Processes in a Stock-flow Consistent Macroeconomic Model," Review of Political Economy, Taylor & Francis Journals, vol. 23(2), pages 189-211.
- Craig Medlen, 2003. "The trouble with Q," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 25(4), pages 693-698, July.
- John DiNardo & Mark P. Moore, 1999.
"The Phillips Curve is Back? Using Panel Data to Analyze the Relationship Between Unemployment and Inflation in an Open Economy,"
NBER Working Papers
7328, National Bureau of Economic Research, Inc.
- DiNardo, J. & Moore, M.P., 1999. "The Phillips Curve is Back? Using Panel Data to Analyze the Relationship Between Unemployment and Inflation in an Open Economy," Papers 99-00-04, California Irvine - School of Social Sciences.
- Peter Skott & Ben Zipperer, 2012.
"An empirical evaluation of three post-Keynesian models,"
European Journal of Economics and Economic Policies: Intervention,
Edward Elgar, vol. 9(2), pages 277-307.
- Peter Skott, Ben Zipperer, 2010. "An empirical evaluation of three post Keynesian models," UMASS Amherst Economics Working Papers 2010-08, University of Massachusetts Amherst, Department of Economics.
- Marc Lavoie, 1995.
"Interest Rates In Post-Keynesian Models Of Growth And Distribution,"
Wiley Blackwell, vol. 46(2), pages 146-177, 06.
- Lavoie, M., 1993. "Interest Rates in Post-Keynesian Models of Growth and Distribution," Working Papers 9314e, University of Ottawa, Department of Economics.
- Choi, In, 2001. "Unit root tests for panel data," Journal of International Money and Finance, Elsevier, vol. 20(2), pages 249-272, April.
- Hsiao, C. & Mountain, D.C., 1993. "A Framework for Regional Modeling and Impact Analysis - An Analysis of the Demand for Electricity by Large Municipalities in Ontario, Canada," Papers 9317, Southern California - Department of Economics.
- Engelbert Stockhammer, 2004.
"Financialisation and the slowdown of accumulation,"
Cambridge Journal of Economics,
Oxford University Press, vol. 28(5), pages 719-741, September.
- Dutt, Amitava Krishna, 1984. "Stagnation, Income Distribution and Monopoly Power," Cambridge Journal of Economics, Oxford University Press, vol. 8(1), pages 25-40, March.
- Paul Davidson, 1991. "Is Probability Theory Relevant for Uncertainty? A Post Keynesian Perspective," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 129-143, Winter.
- Kiviet, Jan F., 1995.
"On bias, inconsistency, and efficiency of various estimators in dynamic panel data models,"
Journal of Econometrics,
Elsevier, vol. 68(1), pages 53-78, July.
- Tom Doan, . "LSDVC: RATS procedure to estimate a dynamic FE model with correction for bias," Statistical Software Components RTS00111, Boston College Department of Economics.
- Arellano, Manuel & Bond, Stephen, 1991.
"Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations,"
Review of Economic Studies,
Wiley Blackwell, vol. 58(2), pages 277-97, April.
- Tom Doan, . "RATS program to replicate Arellano-Bond 1991 dynamic panel," Statistical Software Components RTZ00169, Boston College Department of Economics.
- Skott, Peter, 1989. "Effective Demand, Class Struggle and Cyclical Growth," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(1), pages 231-47, February.
- Eckhard Hein & Carsten Ochsen, 2003. "Regimes of Interest Rates, Income Shares, Savings and Investment: A Kaleckian Model and Empirical Estimations for some Advanced OECD Economies," Metroeconomica, Wiley Blackwell, vol. 54(4), pages 404-433, November.
- James Tobin, 1978.
"A Proposal for International Monetary Reform,"
Cowles Foundation Discussion Papers
506, Cowles Foundation for Research in Economics, Yale University.
- Marc Lavoie & Gabriel Rodriguez & Mario Seccareccia, 2004. "Similitudes and Discrepancies in Post-Keynesian and Marxist Theories of Investment: A Theoretical and Empirical Investigation," International Review of Applied Economics, Taylor & Francis Journals, vol. 18(2), pages 127-149.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marie-Celeste Edwards).
If references are entirely missing, you can add them using this form.