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Single-Period Analysis: Financial Markets, Firms’ Failures and Closure of the Monetary Circuit

In: The Monetary Theory of Production

Author

Listed:
  • Marcello Messori
  • Alberto Zazzaro

Abstract

The seminal contributions of Augusto Graziani (1982; 1984) to the monetary theory of production make it clear that the realisation of monetary gross profits of firms at the macroeconomic level represents the most intricate and awkward puzzle in the circuit approach. The analytical reason for this puzzle is simple: assuming a single macro period, isolated from those that precede and follow it, and a private pure credit economy, closed to foreign exchanges, the quantity of means of payment introduced into the economy at the beginning of the period coincides with the total debt of firms and with the wage bill; hence the total monetary revenues realised by the set of firms at the closure of the period will at most be equal to their initial debt and cannot account either for the existence of monetary profits or for the monetary payment of bank interest.1

Suggested Citation

  • Marcello Messori & Alberto Zazzaro, 2005. "Single-Period Analysis: Financial Markets, Firms’ Failures and Closure of the Monetary Circuit," Palgrave Macmillan Books, in: Giuseppe Fontana & Riccardo Realfonzo (ed.), The Monetary Theory of Production, chapter 7, pages 111-123, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-52307-4_8
    DOI: 10.1057/9780230523074_8
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    Citations

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    Cited by:

    1. Olivier Allain, 2007. "Monetary circulation, the paradox of profits, and the velocity of money," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00196485, HAL.
    2. Javidanrad, Farzad, 2021. "Paradox of Monetary Profit, Shortage of Money in Circulation & Financialisation," The Warwick Economics Research Paper Series (TWERPS) 1365, University of Warwick, Department of Economics.
    3. Egmont Kakarot-Handtke, 2013. "The Emergence of Profit and Interest in the Monetary Circuit," World Economic Review, World Economics Association, vol. 2013(2), pages 106-106, February.
    4. Guglielmo Forges Davanzati & Andrea Pacella, 2010. "Emulation, indebtedness and income distribution: A monetary theory of production approach," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 7(1), pages 147-165.
    5. Colacchio, Giorgio & Forges Davanzati, Guglielmo, 2017. "Endogenous money, increasing returns and economic growth: Nicholas Kaldor’s contribution," Structural Change and Economic Dynamics, Elsevier, vol. 41(C), pages 79-85.
    6. Andrea Pacella, 2008. "The Effects Of Labour Market Flexibility In The Monetary Theory Of Production," Metroeconomica, Wiley Blackwell, vol. 59(4), pages 608-632, November.

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