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Endogenous Banking Markup, Distributional Conflict and Capacity Utilization

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  • Gilberto Tadeu Lima
  • Antonio J. A. Meirelles

Abstract

We develop a post-Keynesian macrodynamic model of productive capacity utilization and income distribution in which the supply of credit-money is endogenous. Nominal interest rate is set by banks as a markup over the base rate, which is exogenously determined by the monetary authority. Over time, banking markup falls with firms' profit rate on physical capital and rises with the rate of inflation, whereas the base rate remains unchanged. The dynamic behaviour of the system is analysed for both cases regarding capacity utilization, namely full utilization and excess capacity, which then makes for the possibility of multiple equilibria for the state variables real wage and nominal interest rate. Copyright Blackwell Publishing Ltd 2003.

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  • Gilberto Tadeu Lima & Antonio J. A. Meirelles, 2003. "Endogenous Banking Markup, Distributional Conflict and Capacity Utilization," Metroeconomica, Wiley Blackwell, vol. 54(2-3), pages 366-384, May.
  • Handle: RePEc:bla:metroe:v:54:y:2003:i:2-3:p:366-384
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    Cited by:

    1. Gilberto Tadeu Lima & Antonio J. A. Meirelles, 2007. "Macrodynamics of debt regimes, financial instability and growth," Cambridge Journal of Economics, Oxford University Press, vol. 31(4), pages 563-580, July.
    2. Greg Hannsgen, 2005. "Minsky's acceleration channel and the role of money," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 27(3), pages 471-489.
    3. José Luís Oreiro, 2006. "Capital mobility, real exchange rate appreciation, and asset price bubbles in emerging economies: a Post Keynesian macroeconomic model for a small open economy," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 28(2), pages 317-344, January.
    4. Sébastien Charles, 2010. "Explaining persistent cycles in a short-run context: firms' propensity to invest and omnipotent shareholders," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 32(3), pages 409-426, April.
    5. Antonio Meirelles & Gilberto Lima, 2006. "Debt, financial fragility, and economic growth: a Post Keynesian macromodel," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 29(1), pages 93-115.

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