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THE IMPORTANCE OF THE RETENTION RATIO IN A KALECKIAN MODEL WITH DEBT ACCUMULATION
Author(s) -
Sasaki Hiroaki,
Fujita Shinya
Publication year - 2012
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.2011.04143.x
Subject(s) - economics , debt , constraint (computer aided design) , monetary economics , value (mathematics) , capital accumulation , keynesian economics , microeconomics , macroeconomics , mathematics , profit (economics) , statistics , geometry
By using a Kaleckian model with debt accumulation, Hein (2007; Metroeconomica , 56 (2), pp. 310–39) found that the long‐run equilibrium value of the debt–capital ratio is positive and stable only if interest rates are extremely high and if the short‐run equilibrium exhibits the ‘debt‐led’ growth regime. However, this conclusion crucially depends on the assumption that the retention ratio of firms is equal to unity. By relaxing this assumption, we show that there exists a positive and stable long‐run equilibrium even under the ‘debt‐burdened’ regime without any constraint on the nominal interest rate.