Saving does not finance Investment: Accounting as an indispensableguide to economic theory
The paper analyses the accounting relationships between the financial and the real economy. It will be shown that accounting can clarify the nature of economic phenomena and be an important building block for economic theory. The paper will argue that there is much confusion about key macroeconomic concepts like saving, investment and finance. This confusion is best summarised in the statement "saving finances investment". After clearly defining the accounting relationships between lending, financial saving and physical investment it will be shown that this is a nonsense statement. The theory behind it - the loanable funds theory - will be analysed and critiqued. It will be shown that the loanable funds theory confuses the concepts of income and production, lending and saving, and financial saving and non-financial saving. It will further be shown that this has not only theoretical but also important policy implications.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
| Length: | 37pages |
| Date of creation: | 2012 |
| Date of revision: | |
| Handle: | RePEc:imk:wpaper:100-2012 |
| Contact details of provider: | Postal: Phone: +49 211 7778 234 Fax: +49 211 7778 4234 Web page: http://www.imk-boeckler.deEmail: More information through EDIRC
|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Simon G. Gilchrist & Ben Bernanke & Mark Gertler, 1994.
"The financial accelerator and the flight to quality,"
Finance and Economics Discussion Series
94-18, Board of Governors of the Federal Reserve System (U.S.).
- Bernanke, Ben & Gertler, Mark & Gilchrist, Simon, 1996. "The Financial Accelerator and the Flight to Quality," The Review of Economics and Statistics, MIT Press, vol. 78(1), pages 1-15, February.
- Ben Bernanke & Mark Gertler & Simon Gilchrist, 1994. "The Financial Accelerator and the Flight to Quality," NBER Working Papers 4789, National Bureau of Economic Research, Inc.
- Bernanke, Ben & Gertler, Mark & Gilchrist, Simon, 1994. "The Financial Accelerator and the Flight to Quality," Working Papers 94-24, C.V. Starr Center for Applied Economics, New York University.
- 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.
- Hansjorg Klausinger, 1999. "German Anticipations of the Keynesian Revolution?: The Case of Lautenbach, Neisser and Ropke," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 6(3), pages 378-403.
- M. G. Hayes, 2010. "The loanable funds fallacy: saving, finance and equilibrium," Cambridge Journal of Economics, Oxford University Press, vol. 34(4), pages 807-820.
- Bibow, Jorg, 2001. "The Loanable Funds Fallacy: Exercises in the Analysis of Disequilibrium," Cambridge Journal of Economics, Oxford University Press, vol. 25(5), pages 591-616, September.
- Hans-Werner Sinn, 2010. "Rescuing Europe," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, vol. 11(SPECIALIS), pages 1-22, 08.
This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.
When requesting a correction, please mention this item's handle: RePEc:imk:wpaper:100-2012. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sabine Nemitz)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.