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.
|Date of creation:||Mar 2012|
|Contact details of provider:|| Postal: Thornhaugh Street, London WC1H OXG|
Web page: http://www.soas.ac.uk/economics/
More information through EDIRC
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.:
- Engelbert Stockhammer, 2004.
"Financialisation and the slowdown of accumulation,"
Cambridge Journal of Economics,
Oxford University Press, vol. 28(5), pages 719-741, September.
- Jan Toporowski, 2008. "Minsky's 'induced investment and business cycles'," Cambridge Journal of Economics, Oxford University Press, vol. 32(5), pages 725-737, September.
- Eckhard Hein, 2004.
"Interest rate, debt, distribution and capital accumulation in a post-Kaleckian model,"
- Eckhard Hein, 2007. "Interest Rate, Debt, Distribution And Capital Accumulation In A Post-Kaleckian Model," Metroeconomica, Wiley Blackwell, vol. 58(2), pages 310-339, 05.
- 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.
- 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.
- 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.
When requesting a correction, please mention this item's handle: RePEc:soa:wpaper:169. 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: (Duo QIN)
If references are entirely missing, you can add them using this form.