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|
|Date of revision:|
|Contact details of provider:|| Postal: Thornhaugh Street, London WC1H OXG|
Web page: http://www.soas.ac.uk/economics/
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.:
- 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 Discussion Papers 133, Wirtschafts- und Sozialwissenschaftliches Institut (WSI), Hans-Böckler-Stiftung.
- 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.
- 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 119-63, June.
- 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.
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)The email address of this maintainer does not seem to be valid anymore. Please ask Duo QIN to update the entry or send us the correct email address
If references are entirely missing, you can add them using this form.