Circuit with Multi-period Credit

Edouard Cottin-Euziol and Louis-Philippe Rochon

Review of Political Economy, 2013, vol. 25, issue 3, 461-475

Abstract: We develop a circuit model in which firms finance part of their investment using bank credit issued and reimbursed over several periods. The model has three main properties: profits originate in the overlap of investments financed by bank credit that remain to be repaid; Say's Law is not verified, even when households do not save within a period; and the rate of investment must increase and then level off over time to avoid an overproduction crisis.

Date: 2013
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DOI: 10.1080/09538259.2013.807672

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