Reconsidering the Investment-Profit Nexus in Finance-Led Economies: an ARDL-Based Approach

Till van Treeck ()
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Till van Treeck: IMK at the Hans Boeckler Foundation

No 01-2007, IMK Working Paper from IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute

Abstract: A simple Post Keynesian growth model is developed, in which financial variables are explicitly taken into account. Different possible accumulation regimes are derived with respect to changes of these variables. Several variants of an investment function are estimated econometrically. The ARDL-based approach proposed by Pesaran et al. (2001) is argued to be superior for this purpose to the traditional cointegration approach. The econometric results are discussed with respect to a remarkable phenomenon that can be observed for some important OECD countries since the early 1980s: accumulation has generally been declining while profit rates have shown a tendency to rise. The author concentrates on one potential explanation of this phenomenon which is particularly relevant for the USA and relies on the hypothesis of a high propensity to consume out of capital income. The paper also gives an alternative explanation of the so-called "New Economy boom" in the USA at the end of the 1990s.

Keywords: Investment; Profitability; Financialisation; Time Series Econometrics. (search for similar items in EconPapers)
JEL-codes: C22 D14 E22 E25 G3 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2007-01
New Economics Papers: this item is included in nep-mac and nep-pke
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: RECONSIDERING THE INVESTMENT-PROFIT NEXUS IN FINANCE-LED ECONOMIES: AN ARDL-BASED APPROACH (2008)
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