Dynamic investment and financial development, application of Kaleckian, Post-Keynesian model

Abstract

Investment analysis at the macroeconomic level has been very extensive, ever since Keynes (1936) placed the investment function at centre stage when analysing why a market capitalist economy does not necessarily achieve full employment equilibrium. Keynesians posit that goods market demand determines labor market outcomes. Thus the idea of a hierarchy of markets is implied. In particular neo-Kaleckian hypotheses about the relation between the profit share and capacity utilisation (Bhaduri and Marglin 1990, Blecker 1999) is explored. In this study, a Kaleckian-Post-Keynesian macroeconomic investment model, which is an extended version of the Bhaduri and Marglin (1990) serves as the starting point. This study attempts to investigate the impact of financial development on domestic investment behaviour.