Evidence shows that, in most European countries, both credit restriction on the part of banks and reduction of the demand for credit on the part of firms are in operation. This is particularly intense in Italy. The aim of this paper is to show that both phenomena ultimately depend on the decline of aggregate demand, insofar as it negatively affects firms’ current and expected profits. A macroeconomic schema is presented, based on Graziani's view that the operation of the credit market can trigger economic crises. Keynesian and Institutional arguments are also considered in order to analyse the links existing between the dynamics of the credit market and the path of wages and employment.
Guglielmo Forges Davanzati
Guglielmo Forges Davanzati and Andrea Pacella
The aim of this paper is to study the effect of emulation within a basic schema of the monetary theory of production (MTP). A theoretical model is presented, where workers set their target level of consumption based on the comparison with other workers taken as reference. It is shown that emulation can play a crucial role in increasing workers' propensity to indebtedness. As a result, profits increase and so does the price level, thus generating a decline of the real wage. Moreover, the existence of indebtedness can provide a further solution to the so-called »paradox of profits« within the MTP.