Prices and Distribution in a Sraffian Credit Economy

Abstract

Sraffa's suggestion regarding the monetary determination of the rate of profits raises two fundamental questions addressed by this paper: (i) can the money rates of interest be envisaged as variables set by the financial system independently of the real sector of the economy? (ii) How can they determine the general rate of profits and so allow for the determination of natural prices and income distribution? To elaborate on the intuition that the competitive process must link the rate of profits earned in the financial sector (and ruled by the intermediaries' margin) to that earned in the production sector, a long-period credit economy is constructed. Unlike previous attempts, the system of equations describing such an economy leaves Sraffa's (1960) original price equations unaffected. If certain fairly unrestrictive conditions are met, the solution of this system is shown to exist and to be economically meaningful, hence supporting Sraffa's hint that the rates of interest are free to determine the rate of profits outside of the system of production.

Interest Rate, Debt, Distribution and Capital Accumulation in a Post‐kaleckian Model

“…In order to do this we will base our analysis on the model briefly outlined by Lavoie (1993) and further 5 Lavoie (1995) shows that this result is not only true for the Kaldor/Robinson variant of the post-Keynesian distribution and growth model based on flexible prices with respect to demand but also for Eichner's model based on mark-up pricing in an oligopolistic goods market in which the mark-up is determined by the required internal means of finance for planned investment. 6 See Panico (1985), Pivetti (1985Pivetti ( , 1987Pivetti ( , 1991Pivetti ( , 2001 and Ciccarone (1998), among others. elaborated in Hein (1999), and we will explicitly consider the effects of debt and interest payments in this model, in the short as well as in the long run.…”

On the (In-)stability and the Endogeneity of the Normal Rate of Capacity Utilization in a Post-Keynesian/Kaleckian ‘Monetary’ Distribution and Growth Model

“…If changes in the interest rate are lasting, however, mark-up and profit share will have to change in the same direction, because in the long run firms can only sustain those production processes which yield the minimum rate of profit determined by the interest rate. This position that considers interest to be a part of firms' long-run costs of production can, in particular, be found in neo-Ricardian work (Ciccarone 1998;Panico 1985;Pivetti 1985Pivetti , 1988Pivetti , 1991. There it is argued that the exogenously given monetary interest rate determines the rate of profit and closes the degree of freedom of the production price model by Sraffa (1960).…”

Income distribution, banks and managers: A linear joint‐production model with financial assets

“…The types of loans considered in the Sraffian models proposed by Dvoskin and Feldman (2021), Panico et al. (2012), and Ciccarone (1998) do not coincide. Dvoskin and Feldman (2021) and Ciccarone (1998) consider loans that are known in creditor terminology as “asset‐based loans”, Panico et al.…”

“…The types of loans considered in the Sraffian models proposed by Dvoskin and Feldman ( 2021 ), Panico et al ( 2012 ), and Ciccarone ( 1998 ) do not coincide. Dvoskin and Feldman ( 2021 ) and Ciccarone ( 1998 ) consider loans that are known in creditor terminology as "asset-based loans", Panico et al ( 2012 ) assume loans called "cash-flow loans". 7 The main difference between "asset-based loans" and "cash-flow loans" is that while "cash-flow loans" finance working capital and allow firms to buy and sell intermediate inputs and products to continue operating, "asset-based loans" finance investment in fixed capital and allow firms to expand.…”

“…According to Lian and Ma ( 2021 ), 80% of corporate debt in the US is based on cash-flow loans. 8 Dvoskin and Feldman ( 2021 ) and Ciccarone ( 1998 ) consider that loans mainly finance investment. They also consider that the credits can finance the companies' working capital, but this scheme is carried out as if the credits were "asset-based loans".…”