IDEAS home Printed from https://ideas.repec.org/h/eme/rpeczz/s0161-7230(2013)0000028009.html
   My bibliography  Save this book chapter

Does Investment Call the Tune? Empirical Evidence and Endogenous Theories of the Business Cycle

In: Contradictions: Finance, Greed, and Labor Unequally Paid

Author

Listed:
  • Jose´ A. Tapia Granados

Abstract

Theories of the business cycle can be classified into two main groups, exogenous and endogenous, according to the way they explain economic fluctuations – either as responses of the economy to factors that are external (exogenous shocks) or as upturns and downturns of the economic system internally generated (by endogenous factors). In endogenous theories, investment is generally a key variable to explain the dynamic status of the economy. This essay examines the role of investment in endogenous theories. Two contrasting views on how changes in investment and profitability push the economy towards expansion or contraction are represented by the insights of Kalecki, Keynes, Matthews and Minsky versus those of Marx and Mitchell. Hyman Minsky claimed that investment ‘calls the tune’ to indicate that investment is the only variable not determined by other variables, so that future profits, investment and the dynamic status of the economy are determined by current investment and investment in the near past. However, this hypothesis does not appear to be supported by available empirical data for 251 quarters of the US economy. Statistical evidence rather supports the hypothesis of causality in the direction of profits determining investment and, in this way, leading the economy towards boom or bust.

Suggested Citation

  • Jose´ A. Tapia Granados, 2013. "Does Investment Call the Tune? Empirical Evidence and Endogenous Theories of the Business Cycle," Research in Political Economy, in: Contradictions: Finance, Greed, and Labor Unequally Paid, pages 229-259, Emerald Group Publishing Limited.
    • Handle: RePEc:eme:rpeczz:s0161-7230(2013)0000028009
    DOI: 10.1108/S0161-7230(2013)0000028009
    as

    Download full text from publisher

    File URL: https://www.emerald.com/insight/content/doi/10.1108/S0161-7230(2013)0000028009/full/html?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://www.emerald.com/insight/content/doi/10.1108/S0161-7230(2013)0000028009/full/pdf?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://www.emerald.com/insight/content/doi/10.1108/S0161-7230(2013)0000028009/full/epub?utm_source=repec&utm_medium=feed&utm_campaign=repec&title=10.1108/S0161-7230(2013)0000028009
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1108/S0161-7230(2013)0000028009?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Tapia, Jose, 2015. "Profits encourage investment, investment dampens profits, government spending does not prime the pump — A DAG investigation of business-cycle dynamics," MPRA Paper 64698, University Library of Munich, Germany.
    2. Duque Garcia, Carlos Alberto, 2022. "Ciclos económicos, inversión y rentabilidad del capital en Colombia: un análisis de series de tiempo [Economic cycles, investment and profits in Colombia: a time-series analysis]," MPRA Paper 113272, University Library of Munich, Germany.
    3. Duque Garcia, Carlos Alberto, 2021. "Economic Growth and the Rate of Profit in Colombia 1967-2019: A VAR Time-Series Analysis," MPRA Paper 109890, University Library of Munich, Germany.
    4. Trofimov, Ivan D., 2022. "Determinants of the profit rates in the OECD economies: A panel data analysis of the Kalecki's profit equation," Structural Change and Economic Dynamics, Elsevier, vol. 61(C), pages 380-397.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eme:rpeczz:s0161-7230(2013)0000028009. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Emerald Support (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.