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Macrodynamics of debt regimes, financial instability and growth

  • Gilberto Tadeu Lima
  • Antonio J. A. Meirelles

It is developed a dynamic macromodel of utilization and growth of productive capacity, in which the supply of credit-money is endogenous and firms' debt position - and thus the financial fragility of the economy à la Hyman Minsky - is explicitly modeled. The rate of interest is set as a markup over the base rate, which is exogenously determined by the monetary authority. Banking markup varies with changes in economic activity, which is measured by capacity utilization, while firms' debt position varies with the rates of interest, profit and capital accumulation. Regarding dynamics, it is shown the possibility of relating the stability properties of a system with the interest rate and the debt ratio as state variables to the type of minskyan regime - hedge, speculative, Ponzi - which prevails.

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

Volume (Year): 31 (2007)
Issue (Month): 4 (July)
Pages: 563-580

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Handle: RePEc:oup:cambje:v:31:y:2007:i:4:p:563-580
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  1. Angbazo, Lazarus, 1997. "Commercial bank net interest margins, default risk, interest-rate risk, and off-balance sheet banking," Journal of Banking & Finance, Elsevier, vol. 21(1), pages 55-87, January.
  2. Gilberto Tadeu Lima, 2000. "Market concentration and technological innovation in a dynamic model of growth and distribution," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 53(215), pages 447-475.
  3. Brock, Philip L. & Rojas Suarez, Liliana, 2000. "Understanding the behavior of bank spreads in Latin America," Journal of Development Economics, Elsevier, vol. 63(1), pages 113-134, October.
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  6. Domenico Delli Gatti & Mauro Gallegati, 1990. "Financial Instability, Income Distribution, and the Stock Market," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 12(3), pages 356-374, April.
  7. Antonio J.A. Meirelles & Gilberto Tadeu Lima, 2006. "Debt, financial fragility, and economic growth: a Post Keynesian macromodel," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 29(1), pages 93-115, October.
  8. Tarsila Segalla Afanasieff & Priscilla Maria Villa Lhacer & Márcio I. Nakane, 2002. "The Determinants of Bank Interest Spread in Brazil," Money Affairs, Centro de Estudios Monetarios Latinoamericanos, vol. 0(2), pages 183-207, July-Dece.
  9. Saunders, Anthony & Schumacher, Liliana, 2000. "The determinants of bank interest rate margins: an international study," Journal of International Money and Finance, Elsevier, vol. 19(6), pages 813-832, December.
  10. Demirguc-Kunt, Asli & Huizinga, Harry, 1998. "Determinants of commercial bank interest margins and profitability : some international evidence," Policy Research Working Paper Series 1900, The World Bank.
  11. Aronovich, Selmo, 1994. "Uma nota sobre os efeitos da inflação e do nível de atividade sobre o spread bancário," Revista Brasileira de Economia, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil), vol. 48(1), January.
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  14. 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, 05.
  15. Stephen Rousseas, 1985. "A Markup Theory of Bank Loan Rates," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 8(1), pages 135-144, October.
  16. repec:fgv:epgrbe:v:48:n:1:a:7 is not listed on IDEAS
  17. Martin H. Wolfson, 1996. "A Post Keynesian Theory of Credit Rationing," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 18(3), pages 443-470, April.
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  19. Foley, Duncan K., 1987. "Liquidity-profit rate cycles in a capitalist economy," Journal of Economic Behavior & Organization, Elsevier, vol. 8(3), pages 363-376, September.
  20. Gilberto Tadeu Lima, 2004. "Endogenous Technological Innovation, Capital Accumulation And Distributional Dynamics," Metroeconomica, Wiley Blackwell, vol. 55(4), pages 386-408, November.
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