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Investment, Finance and the Business Cycle: Evidence from the Dutch Manufacturing Sector

  • van Ees, Hans
  • Kuper, Gerard H
  • Sterken, Elmer

In this paper, the authors analyze the impact of profits on investment using data from the Dutch manufacturing sector in a simple Kaleckian investment model. Profits and capacity determine the level of investment. The empirical analysis of this 'nonmainstream' model confirms conclusions drawn in the context of financial accelerator models. The impact of profits on investment is countercyclical. Apparently, entrepreneurs use public capital markets primarily as a source of funds in booming periods. Copyright 1997 by Oxford University Press.

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Article provided by Oxford University Press in its journal Cambridge Journal of Economics.

Volume (Year): 21 (1997)
Issue (Month): 3 (May)
Pages: 395-407

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Handle: RePEc:oup:cambje:v:21:y:1997:i:3:p:395-407
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  1. Mark Gertler, 1988. "Financial structure and aggregate economic activity: an overview," Proceedings, Federal Reserve Bank of Cleveland, pages 559-596.
  2. Ben Bernanke & Mark Gertler, 1987. "Financial Fragility and Economic Performance," NBER Working Papers 2318, National Bureau of Economic Research, Inc.
  3. Ees, Hans Van & Garretsen, Harry, 1994. "Liquidity and business investment: Evidence from dutch panel data," Journal of Macroeconomics, Elsevier, vol. 16(4), pages 613-627.
  4. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
  5. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
  6. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
  7. Bernanke, Ben & Gertler, Mark, 1989. "Agency Costs, Net Worth, and Business Fluctuations," American Economic Review, American Economic Association, vol. 79(1), pages 14-31, March.
  8. Bruce C. Greenwald & Joseph E. Stiglitz & Andrew Weiss, 1984. "Informational Imperfections in the Capital Market and Macro-Economic Fluctuations," NBER Working Papers 1335, National Bureau of Economic Research, Inc.
  9. Steven M. Fazzari & R. Glenn Hubbard & BRUCE C. PETERSEN, 1988. "Financing Constraints and Corporate Investment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(1), pages 141-206.
  10. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
  11. Hans Ees & Gerard H. Kuper & Elmer Sterken, 1996. "Profits, Investment And Business Fluctuations," Metroeconomica, Wiley Blackwell, vol. 47(1), pages 19-33, 02.
  12. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-70, November.
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