Chapter 6: Financialization and Investment: Aggregate Analysis
Financialization can have two potential negative impacts on capital accumulation, as discussed in the previous chapter. First, increased ﬁnancial investment and ﬁnancial proﬁt opportunities can crowd out real investment by creating managerial short-termism and directing funds away from real investment. Second, increased ﬁnancial payments can decrease real investment by decreasing the quantity of available funds for real investment, shortening the planning horizons of ﬁrm management and increasing uncertainty. These two potential negative eﬀects are taken into account in the investment model described above. In this chapter, I econometrically test the eﬀects of ﬁnancial proﬁts and ﬁnancial payments of NFCs on their real investment, using aggregate time-series data for US NFCs. I ﬁnd that the role played by these two variables is empirically supported by the econometric analysis, although statistical signiﬁcance of the parameters is low in some cases. Nevertheless, the results provide initial support for a negative relationship between ﬁnancialization and real investment. This chapter is organized as follows. In the next section, I present the statistical speciﬁcation to be tested and discuss the properties of the data. I turn to econometric issues in the second section and present regression results in the third one. Finally, the last section provides an evaluation of the results and lays the ground for the ﬁrm-level analysis to follow in the next chapter. STATISTICAL SPECIFICATION AND DATA The discussion of the determinants of investment in ﬁxed assets in Chapter 5 considered traditional variables such as rate of pro...
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