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

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  • Hein, Eckhard

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 Wirtschafts- und Sozialwissenschaftliches Institut (WSI), Hans-Böckler-Stiftung in its series WSI Discussion Papers with number 133.

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Date of creation: 2004
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Handle: RePEc:zbw:wsidps:133

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

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  1. Giuseppe Ciccarone, 1998. "Prices and Distribution in a Sraffian Credit Economy," Review of Political Economy, Taylor & Francis Journals, vol. 10(4), pages 399-413.
  2. 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.
  3. Taylor, Lance, 1985. "A Stagnationist Model of Economic Growth," Cambridge Journal of Economics, Oxford University Press, vol. 9(4), pages 383-403, December.
  4. Eckhard Hein, 2005. "Money, Interest, and Capital Accumulation in Karl Marx’s," Method and Hist of Econ Thought 0501002, EconWPA.
  5. Louis-Philippe Rochon, 2001. "Cambridge's Contribution to Endogenous Money: Robinson and Kahn on credit and money," Review of Political Economy, Taylor & Francis Journals, vol. 13(3), pages 287-307.
  6. Matias Vernengo & Louis-Philippe Rochon, 2001. "Kaldor and Robinson on money and growth," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 8(1), pages 75-103.
  7. Hein, Eckhard, 2002. "Money, interest, and capital accumulation in Karl Marx's economics: A monetary interpretation," WSI Discussion Papers 102, Wirtschafts- und Sozialwissenschaftliches Institut (WSI), Hans-Böckler-Stiftung.
  8. 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.
  9. Hein, Eckhard, 1999. "Interest Rates, Income Shares, and Investment in a Kaleckian Model," MPRA Paper 18607, University Library of Munich, Germany.
  10. 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.
  11. Lavoie, M., 1993. "Interest Rates in Post-Keynesian Models of Growth and Distribution," Working Papers 9314e, University of Ottawa, Department of Economics.
  12. 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.
  13. Dutt, Amitava Krishna, 1984. "Stagnation, Income Distribution and Monopoly Power," Cambridge Journal of Economics, Oxford University Press, vol. 8(1), pages 25-40, March.
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  15. Thomas I. Palley, 1996. "Accommodationism versus Structuralism: Time for an Accommodation," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 18(4), pages 585-594, July.
  16. R. Glenn Hubbard, 1998. "Capital-Market Imperfections and Investment," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 193-225, March.
  17. 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).
  18. Hein, Eckhard, 2004. "Money, credit and the interest rate in Marx's economic. On the similarities of Marx's monetary analysis to Post-Keynesian economics," MPRA Paper 18608, University Library of Munich, Germany.
  19. 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.
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  21. 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.
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