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PROFITS, INVESTMENT AND BUSINESS FLUCTUATIONS
Author(s) -
Ees Hans,
Kuper Gerard H.,
Sterken Elmer
Publication year - 1996
Publication title -
metroeconomica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.256
H-Index - 29
eISSN - 1467-999X
pISSN - 0026-1386
DOI - 10.1111/j.1467-999x.1996.tb00385.x
Subject(s) - economics , investment (military) , boom , monetary economics , capital market imperfections , return of capital , recession , capital (architecture) , open ended investment company , stock (firearms) , public investment , business cycle , return on investment , labour economics , macroeconomics , capital market , microeconomics , investment performance , finance , profit (economics) , history , mechanical engineering , archaeology , environmental engineering , politics , political science , law , fiscal policy , engineering
In this paper we analyze the impact of profits on investment in a simple Kaleckian investment model in which profits and capacity determine the level of investment. The analysis leads to the following conclusions. In the first place, the estimated impact of profits on investment behaviour in the Netherlands has diminished in the 1980s. The impact of the stock of capital on investment has remained constant in our sample period. In the second place, it can be observed that the impact of both profits and capital on investment is countercyclical. In periods of boom entrepreneurs prefer public capital markets as a source of investment funds, whereas in a recession they primarily rely on cheaper internal funds.