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

Author

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

Abstract

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.

Suggested Citation

  • van Ees, Hans & Kuper, Gerard H & Sterken, Elmer, 1997. "Investment, Finance and the Business Cycle: Evidence from the Dutch Manufacturing Sector," Cambridge Journal of Economics, Oxford University Press, vol. 21(3), pages 395-407, May.
  • Handle: RePEc:oup:cambje:v:21:y:1997:i:3:p:395-407
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    References listed on IDEAS

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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. 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.
    3. 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.
    4. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-1370, November.
    5. Ben Bernanke & Mark Gertler, 1990. "Financial Fragility and Economic Performance," The Quarterly Journal of Economics, Oxford University Press, vol. 105(1), pages 87-114.
    6. 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.
    7. Greenwald, Bruce & Stiglitz, Joseph E & Weiss, Andrew, 1984. "Informational Imperfections in the Capital Market and Macroeconomic Fluctuations," American Economic Review, American Economic Association, vol. 74(2), pages 194-199, May.
    8. 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.
    9. Hans Ees & Gerard H. Kuper & Elmer Sterken, 1996. "Profits, Investment And Business Fluctuations," Metroeconomica, Wiley Blackwell, vol. 47(1), pages 19-33, February.
    10. 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.
    11. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 39(3), pages 106-135.
    12. 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.
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    Cited by:

    1. Valdero i Mora, Emili & Tremosa i Balcells, Ramon & Obis i Artal, Teresa, 1999. "Macroeconomic Influence in the European Manufacturing Profitability, According to the B.A.C.H. European Union Data Base (1983-1995)," ERSA conference papers ersa99pa044, European Regional Science Association.
    2. Georgios Argitis, 2008. "Finance, Investment and Macroeconomic Performance," European Research Studies Journal, European Research Studies Journal, vol. 0(1-2), pages 71-88.

    More about this item

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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