Credit Money and Kaldor's 'Institutional' Theory of Income Distribution

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This paper combines two major contributions by Kaldor: the view that the supply of money, ensuing mainly from bank credit, is endogenous, and the framework which assigns a crucial role to the saving and investment behaviour of corporations in determining the general rate of profit (the neo-Pasinetti theorem). Bank loans are introduced as another means of financing investment by firms, in addition to retained profits and the new issuance of shares. The proposed model provides a convenient framework in which two different approaches in the money-endogeneity view are classified. Kaldor's neo-Pasinetti theorem is shown to hold for only one of these approaches and is then extended to include the influence of banks.

Original languageEnglish
Pages (from-to)79-99
Number of pages21
JournalReview of Political Economy
Issue number1
Publication statusPublished - 2004 Jan 1


ASJC Scopus subject areas

  • Economics, Econometrics and Finance(all)

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