Edited by Philip Arestis and Malcolm Sawyer
Chapter 11: Kalecki on Money and Finance
11 Kalecki on money and ﬁnance Malcolm Sawyer 1. Introduction Expenditure has to be ﬁnanced and planned increases in expenditure require additional ﬁnance if the plans are to come to fruition. Any analysis of the role of aggregate demand in the determination of the level of economic activity requires consideration to be paid to the question of the ﬁnancing of expenditure. Kalecki’s analysis of the role of aggregate demand was set in a business cycle framework in which ﬂuctuations in investment were the major generator of ﬂuctuations in economic activity. Kalecki’s analysis (and models based on his work, which are given the epithet Kaleckian) often appears to be in real terms and to be undertaken without explicit reference to money. For example, models such as Dutt (1987) and Sawyer (1994), which are described as Kaleckian, make no explicit reference to money. The treatment of investment may seem also to be an example in that the emphasis in the decision to invest is placed on factors such as proﬁtability and capacity utilization. However, the assumption is clearly made that credit is available to ﬁnance the expenditure. In this form, money and credit are treated in an accommodationist fashion; that is, the amount of credit and money follows the demand for credit. But Kalecki also recognized that any expansion could be aborted if banks did not provide the requisite loans and credit (or raised the price of loans in the face of the increased demand for loans suﬃcient to choke...
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