Corporate Liquidity and Financial Fragility: The Role of Investment, Debt and Interest
The paper addresses the issue of how debt deflation may arise in a capitalist economy with a sophisticated credit system. It argues that the standard argument of debt deflationists, that debt-financed investment causes a build-up of unsustainable investment, fails to recognise that debt is back by credit. A corollary of this is that the rate of interest is not a factor in investment decisions. Financial fragility is caused by heterogeneity of balance sheets, debt financed operations in financial markets and insufficient debt-financed investment, rather than too much such investment.
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- Eckhard Hein, 2007.
"Interest Rate, Debt, Distribution And Capital Accumulation In A Post-Kaleckian Model,"
Wiley Blackwell, vol. 58(2), pages 310-339, 05.
- Eckhard Hein, 2004. "Interest rate, debt, distribution and capital accumulation in a post-Kaleckian model," Macroeconomics 0412005, EconWPA.
- Hein, Eckhard, 2004. "Interest rate, debt, distribution and capital accumulation in a post-Kaleckian model," WSI Working Papers 133, The Institute of Economic and Social Research (WSI), Hans-Böckler-Foundation.
- Engelbert Stockhammer, 2004. "Financialisation and the slowdown of accumulation," Cambridge Journal of Economics, Oxford University Press, vol. 28(5), pages 719-741, September.
- Engelbert Stockhammer, 2000. "Financialization and the Slowdown of Accumulation," Working Papers geewp14, Vienna University of Economics and Business Research Group: Growth and Employment in Europe: Sustainability and Competitiveness.
- 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.
- Jan Toporowski, 2008. "Minsky's 'induced investment and business cycles'," Cambridge Journal of Economics, Oxford University Press, vol. 32(5), pages 725-737, September.
- Ruggles, Nancy & Ruggles, Richard, 1992. "Household and Enterprise Saving and Capital Formation in the United States: A Market Transactions View," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 38(2), pages 119-163, June. Full references (including those not matched with items on IDEAS)
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