In this article, we show that the repayment of bank credits having financed investments canrepresent an outflow outside the economic circuit in the Keynesian multiplier theory, just likesavings. We then consider the impact of these repayments on the dynamics of the Domarmodel (Domar, 1947), which aims to extend the Keynesian multiplier to the long-term. Weobtain that the rate of capital accumulation has to gradually rise throughout a growth phase,in order to avoid an overproduction crisis. This result paves the way to a theory of cycles basedon the repayment of past bank credits having financed investments.
- Publication Year
- Publication Type
- Academic Articles
Cottin-Euziol, E. (2015). The repayment of bank credits having financed investments in the Domar model. Brazilian Keynesian Review, 1(2), 177-192.
- Projects involved
- Distributed Global Financial Systems for Society (DOLFINS)