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Interest rate, debt, distribution and capital accumulation in a post-Kaleckian model

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Author Info
Eckhard Hein (WSI in der Hans Boeckler Stiftung)

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Abstract

The introduction of monetary variables into post-Keynesian models of distribution and growth is an ongoing process. Lavoie (1995) has proposed a Kaleckian ‘Minsky-Steindl-model’ of distribution and growth, incorporating the effects debt and debt services have on short and long run capital accumulation. This attempt, however, can be extended because neither has the rate of capacity utilisation been endogenously determined, nor have the potential effects of interest rate variations on distribution between wages and gross profits explicitly been incorporated in the model. In the present paper we therefore augment Lavoie’s ‘Minsky-Steindl-model’, building our analysis on a Kaleckian distribution and growth model which has already taken into account distribution effects of interest rate variations on the short run equilibrium. Into this model the effects of debt and debt services are explicitly introduced, the effects of interest rate variations on the short and the long run equilibrium are derived, and the results are compared to those of Lavoie’s ‘Minsky-Steindl-model’. It is shown, that the effects of interest variations on the endogenously determined equilibrium values of the model do not only depend on the parameter values in the savings and investment functions but also on initial conditions with respect to the interest rate and the debt-capital-ratio.

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Paper provided by EconWPA in its series Macroeconomics with number 0412005.

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Length: 30 pages
Date of creation: 10 Dec 2004
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Handle: RePEc:wpa:wuwpma:0412005

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Related research
Keywords: Interest rate; debt; distribution; capital accumulation;

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Find related papers by JEL classification:
E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
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
O42 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Monetary Growth Models

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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. 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, Blackwell Publishing, vol. 54(4), pages 404-433, November. [Downloadable!] (restricted)
  2. Matias Vernengo, Louis-Philippe Rochon, 2001. "Kaldor and Robinson on money and growth," European Journal of the History of Economic Thought, Taylor and Francis Journals, vol. 8(1), pages 75-103, March. [Downloadable!] (restricted)
  3. Eckhard Hein, 2005. "Money, Interest, and Capital Accumulation in Karl Marx’s," Method and Hist of Econ Thought 0501002, EconWPA. [Downloadable!]
  4. Lavoie, Marc, 1999. "The Credit-Led Supply of Deposits and the Demand for Money: Kaldor's Reflux Mechanism as Previously Endorsed by Joan Robinson," Cambridge Journal of Economics, Oxford University Press, vol. 23(1), pages 103-13, January.
  5. Schiantarelli, Fabio, 1996. "Financial Constraints and Investment: Methodological Issues and International Evidence," Oxford Review of Economic Policy, Oxford University Press, vol. 12(2), pages 70-89, Summer.
  6. Dutt, Amitava Krishna, 1984. "Stagnation, Income Distribution and Monopoly Power," Cambridge Journal of Economics, Oxford University Press, vol. 8(1), pages 25-40, March.
  7. 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.
  8. R. Glenn Hubbard, 1998. "Capital-Market Imperfections and Investment," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 193-225, March. [Downloadable!] (restricted)
    Other versions:
  9. Taylor, Lance, 1985. "A Stagnationist Model of Economic Growth," Cambridge Journal of Economics, Oxford University Press, vol. 9(4), pages 383-403, December.
  10. Lavoie, Marc, 1996. "Horizontalism, Structuralism, Liquidity Preference and the Principle of Increasing Risk," Scottish Journal of Political Economy, Scottish Economic Society, vol. 43(3), pages 275-300, August.
  11. Edward Amadeo & A.K Dutt, 1991. "A post-Keynesian theory of growth, interest and money," Textos para discussão 264, Department of Economics PUC-Rio (Brazil). [Downloadable!]
  12. Hein, Eckhard, 1999. "Interest Rates, Income Shares, and Investment in a Kaleckian Model," MPRA Paper 18607, University Library of Munich, Germany. [Downloadable!]
  13. Louis-Philippe Rochon, 2001. "Cambridge's Contribution to Endogenous Money: Robinson and Kahn on credit and money," Review of Political Economy, Taylor and Francis Journals, vol. 13(3), pages 287-307, July. [Downloadable!] (restricted)
  14. Dutt, Amitava Krishna, 1987. "Alternative Closures Again: A Comment on 'Growth, Distribution and Inflation.'," Cambridge Journal of Economics, Oxford University Press, vol. 11(1), pages 75-82, March.
  15. Steven Fazzari & R. Glenn Hubbard & Bruce C. Petersen, 1988. "Financing Constraints and Corporate Investment," NBER Working Papers 2387, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  16. Malcolm Sawyer, 2001. "Kalecki on money and finance," European Journal of the History of Economic Thought, Taylor and Francis Journals, vol. 8(4), pages 487-508, December. [Downloadable!] (restricted)
  17. Edward Amadeo, 1987. "Expectations in a steady state model of capacity utilization," Textos para discussão 169, Department of Economics PUC-Rio (Brazil). [Downloadable!]
Full references

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 & Till van Treeck, 2008. "'Financialisation' in Post-Keynesian models of distribution and growth - a systematic review," IMK Working Paper 10-2008, 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!]
  3. 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)
    Other versions:
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