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Financialization and its Long-run Macroeconomic Effects in a Kalecki-Minsky Model

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  • Shinya Fujita
  • Hiroaki Sasaki

Abstract

One of the main characteristics of “financialization” is the redistribution of income in favor of shareholders, at the expense of workers. In this paper, we interpret pro-shareholder redistribution as a decrease in both retention ratio and wage share. Using both the Kaleckian macroeconomic model and the Minskyan taxonomy of finance regime, we investigate the long-run effects of such parametric changes on the rate of capital accumulation and the debt-capital ratio, on the one hand, and on the financial structures of firms, on the other. A decrease in the retention ratio leads to higher capital accumulation, but makes financial structures fragile. Moreover, a rise in profit share improves the financial position in the long run if the short-run equilibrium is profit-led growth regime; this is not necessarily so with wage-led growth.

Suggested Citation

  • Shinya Fujita & Hiroaki Sasaki, 2011. "Financialization and its Long-run Macroeconomic Effects in a Kalecki-Minsky Model," Discussion papers e-11-001, Graduate School of Economics Project Center, Kyoto University.
  • Handle: RePEc:kue:dpaper:e-11-001
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    References listed on IDEAS

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    1. Eckhard Hein, 2007. "Interest Rate, Debt, Distribution And Capital Accumulation In A Post-Kaleckian Model," Metroeconomica, Wiley Blackwell, vol. 58(2), pages 310-339, May.
    2. Sebastien Charles, 2008. "A Post-Keynesian Model of Accumulation with a Minskyan Financial Structure," Review of Political Economy, Taylor & Francis Journals, vol. 20(3), pages 319-331.
    3. Eckhard Hein & Till Van Treeck, 2010. "Financialisation and Rising Shareholder Power in Kaleckian/Post-Kaleckian Models of Distribution and Growth," Review of Political Economy, Taylor & Francis Journals, vol. 22(2), pages 205-233.
    4. Gilberto Tadeu Lima & Antonio J. A. Meirelles, 2007. "Macrodynamics of debt regimes, financial instability and growth," Cambridge Journal of Economics, Oxford University Press, vol. 31(4), pages 563-580, July.
    5. Eckhard Hein, 2006. "Interest, Debt and Capital Accumulation—A Kaleckian Approach," International Review of Applied Economics, Taylor & Francis Journals, vol. 20(3), pages 337-352.
    6. Eckhard Hein & Christian Schoder, 2011. "Interest rates, distribution and capital accumulation -- A post-Kaleckian perspective on the US and Germany," International Review of Applied Economics, Taylor & Francis Journals, vol. 25(6), pages 693-723, November.
    7. Antonio Meirelles & Gilberto Lima, 2006. "Debt, financial fragility, and economic growth: a Post Keynesian macromodel," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 29(1), pages 93-115.
    8. Eckhard Hein, 2010. "Shareholder Value Orientation, Distribution And Growth-Short- And Medium-Run Effects In A Kaleckian Model," Metroeconomica, Wiley Blackwell, vol. 61(2), pages 302-332, May.
    9. Sébastien Charles, 2008. "Teaching Minsky's financial instability hypothesis: a manageable suggestion," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 31(1), pages 125-138, September.
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    11. Kazuhiro Kurose, 2004. "Rate of profit and interest in a growth theory with endogenous money," Cambridge Journal of Economics, Oxford University Press, vol. 28(6), pages 889-901, November.
    12. Sébastien Charles, 2008. "Corporate debt, variable retention rate and the appearance of financial fragility," Cambridge Journal of Economics, Oxford University Press, vol. 32(5), pages 781-795, September.
    13. Louis-Philippe Rochon, 1999. "Credit, Money and Production," Books, Edward Elgar Publishing, number 1565.
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    Cited by:

    1. Hein, Eckhard & Dodig, Nina, 2014. "Financialisation, distribution, growth and crises: Long-run tendencies," IPE Working Papers 35/2014, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    2. Hiroshi Nishi, 2012. "On the Short-run Relationship between the Income Distribution- and Finance-Growth Regimes," Discussion papers e-12-001, Graduate School of Economics Project Center, Kyoto University.
    3. Sun, Lixin, 2015. "Quantifying the Effects of Financialisation and Leverage in China," MPRA Paper 69938, University Library of Munich, Germany.
    4. Hiroaki Sasaki & Shinya Fujita, 2012. "Income Distribution, Debt Accumulation, and Financial Fragility in a Kaleckian Model with Labor Supply Constraints," Discussion papers e-12-007, Graduate School of Economics Project Center, Kyoto University.

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