Investment functions and the profitability gap

Richardson, Colin; Romilly, Peter

doi:10.2753/pke0160-3477310102

Cited by 3 publications

(4 citation statements)

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“…The same is true with Keynes (1936) whose investment decisions, i.e. 'the supply price of capital' depends on the difference between the marginal efficiency of capital (MEC), that is, Keynes's definition of profitability, and its difference from the rate of interest, the so-called 'profitability gap', which is expected to stimulate investment expenditures (Richardson and Romilly, 2008). It is important to point out that Keynes (1936, p. 140), in his effort to find precursors to his ideas, wrote that his concept of MEC was 'identical' to Irving Fisher's definition of the 'rate of return over cost'.…”

Section: Review Of Literaturementioning

confidence: 80%

“…For example, in Marx (1894, p. 368) we have the profit rate of enterprise, in Keynes (1936, pp. 135-146) the MEC, in Kalecki (1968) clearly the difference between profit and interest rates is decisive in the investment decisions of firms (Richardson and Romilly, 2008). It is worth stressing that this characteristic feature is not specific to classical approach but rather is shared (with important conceptual differences) by all contending approaches (Mejorado and Roman, 2014, p. 191).…”

Section: Price Variables and The Investment Flowsmentioning

confidence: 98%

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Classical Theory of Investment: Panel Cointegration Evidence From 13 EU Countries

Alexiou

Tsaliki

Tsoulfidis

2016

Contrib Pol Economy

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In the realm of macroeconomic theory, it is well established that investment decisions play an instrumental role in the determination of the level of output and employment; nevertheless, little progress has been made in relation to the theoretical aspects of these decisions. This paper, inspired by the classical approach to capital accumulation as well as the Keynesian theory of effective demand, attempts to enhance our empirical understanding of what determines investment decisions by exploring profitability, financial as well as demand factors. In so doing, a 'Fully Modified OLS' panel cointegration framework, for a cluster of two distinct groups of EU countries classified as core and the peripheral economies, provides the platform upon which our econometric investigation takes place. The respective evidence generated from the estimation process is in line with the theoretical framework proposed in this paper.

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Section: Review Of Literaturementioning

confidence: 80%

Section: Price Variables and The Investment Flowsmentioning

confidence: 98%

Classical Theory of Investment: Panel Cointegration Evidence From 13 EU Countries

Alexiou

Tsaliki

Tsoulfidis

2016

Contrib Pol Economy

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“…This important factor is the innovation effect on the investments which generates an increase in the productivity owing to the technical process 2 (Courvisanos, 2003;Kalecki, 1968). Kalecki who admits the innovation as a development factor also accepts that this factor is an explanatory for the long-term upward trend (Richardson and Romilly, 2008). This positive effect of technological innovation on growth reveals because of its positive relation with employment in the meantime.…”

Section: Roles Of Investment and Innovation In Business Cycle From Kamentioning

confidence: 99%

Roles of Investment and Innovation in Business Cycle from Kalecki’s Perspective with a Schumpeterian Approach: an Empirical Analysis for Turkey and Greece

Aktakas

Aytun

Akın

2012

JECOSS

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“…The capital investment functions proposed by economists of all schools, both mainstream and heterodox, are shown to contain this profitability gap mechanism by Richardson and Romilly 55 …”

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confidence: 96%

Toward a synthetic economic systems modeling tool for sustainable exploitation of ecosystems

Richardson

Courvisanos

Crawford

2011

Annals of the New York Academy of Sciences

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Environmental resources that underpin the basic human needs of water, energy, and food are predicted to become in such short supply by 2050 that global security and the well-being of millions will be under threat. These natural commodities have been allowed to reach crisis levels of supply because of a failure of economic systems to sustain them. This is largely because there have been no means of integrating their exploitation into any economic model that effectively addresses ecological systemic failures in a way that provides an integrated ecological-economic tool that can monitor and evaluate market and policy targets. We review the reasons for this and recent attempts to address the problem while identifying outstanding issues. The key elements of a policy-oriented economic model that integrates ecosystem processes are described and form the basis of a proposed new synthesis approach. The approach is illustrated by an indicative case study that develops a simple model for rainfed and irrigated food production in the Murray-Darling basin of southeastern Australia.

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Investment functions and the profitability gap

Abstract: We examine a variety of fixed asset investment theory approaches and show that, despite apparent differences, all contain a common 'gene ' -the

Cited by 3 publications

References 50 publications

Classical Theory of Investment: Panel Cointegration Evidence From 13 EU Countries

Classical Theory of Investment: Panel Cointegration Evidence From 13 EU Countries

Roles of Investment and Innovation in Business Cycle from Kalecki’s Perspective with a Schumpeterian Approach: an Empirical Analysis for Turkey and Greece

Toward a synthetic economic systems modeling tool for sustainable exploitation of ecosystems

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