Finance, Saving and Accumulation
This paper analyzes the interaction between financial and real variables in different time frames and monetary regimes. Firms finance investment through retained earnings, new issues, or bank loans, and households' desired portfolio of financial assets is related to current income flows. The average saving propensity becomes an endogenous variable determined jointly by household and firm decisions and it is shown that changes in the basic parameters give rise to both saving and valuation effects. Contrary to standard Keynesian results, an increase in a saving parameter may be expansionary if the valuation effect dominates the saving effect. Copyright 1988 by Oxford University Press.
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Volume (Year): 12 (1988)
Issue (Month): 3 (September)
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