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Investment, finance and the business cycle: Evidence from the Dutch manufacturing sector

Author Info

Listed author(s):
  • Hans van Ees
  • Gerard H. Kuper
  • Elmer Sterken ,

Abstract

In this paper we analyse the impact of profits on investment using data of the Dutch manufacturing sector in a simple Kaleckian investment model. Profits and capacity determine the level of investment. The empirical analysis with this "non-mainstream" model confirms conclusions drawn in the context of financial accelerator models. The impact of profits on investment is countercyclical. Apparently, entrepreneurs primarily use public capital markets as a source of funds in booming periods.

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File URL: http://www.eco.rug.nl/ccso/zip-file/ccso23.zip
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Paper provided by Centre for Economic Research, University of Groningen and University of Twente in its series Working Papers with number 23.

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Length:
Date of creation: Apr 1995
Publication status: published in the Cambridge Journal of Economics.
Handle: RePEc:wop:ccsowp:0023
Contact details of provider: Postal:
PO Box 800, 9700 AV Groningen

Phone: 31 50 363 3749
Fax: 31 50 363 3720
Web page: http://www.rug.nl/research/som-ri/
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Keywords: firm profits; investment; business cycles;

Other versions of this item:

Find related papers by JEL classification:
  • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
  • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
  • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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  1. Mark Gertler, 1988. "Financial structure and aggregate economic activity: an overview," Proceedings, Federal Reserve Bank of Cleveland, pages 559-596.
  2. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
  3. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
  4. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-1370, November.
  5. Ben Bernanke & Mark Gertler, 1990. "Financial Fragility and Economic Performance," The Quarterly Journal of Economics, Oxford University Press, vol. 105(1), pages 87-114.
  6. Steven M. Fazzari & R. Glenn Hubbard & BRUCE C. PETERSEN, 1988. "Financing Constraints and Corporate Investment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(1), pages 141-206.
  7. Greenwald, Bruce & Stiglitz, Joseph E & Weiss, Andrew, 1984. "Informational Imperfections in the Capital Market and Macroeconomic Fluctuations," American Economic Review, American Economic Association, vol. 74(2), pages 194-199, May.
  8. 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.
  9. Hans Ees & Gerard H. Kuper & Elmer Sterken, 1996. "Profits, Investment And Business Fluctuations," Metroeconomica, Wiley Blackwell, vol. 47(1), pages 19-33, 02.
  10. Ees, Hans Van & Garretsen, Harry, 1994. "Liquidity and business investment: Evidence from dutch panel data," Journal of Macroeconomics, Elsevier, vol. 16(4), pages 613-627.
  11. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 39(3), pages 106-135.
  12. 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.
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Cited by:

  1. Valdero i Mora, Emili & Tremosa i Balcells, Ramon & Obis i Artal, Teresa, 1999. "Macroeconomic Influence in the European Manufacturing Profitability, According to the B.A.C.H. European Union Data Base (1983-1995)," ERSA conference papers ersa99pa044, European Regional Science Association.
  2. Georgios Argitis, 2008. "Finance, Investment and Macroeconomic Performance," European Research Studies Journal, European Research Studies Journal, vol. 0(1-2), pages 71-88.

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