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Chapter 13: ‘Financialisation’ in Post-Keynesian Models of Distribution and Growth: A Systematic Review
13 “Financialisation” in post-Keynesian models of distribution and growth: a systematic review* Eckhard Hein and Till van Treeck 1 Introduction Recent decades have seen major changes in the financial sectors of developed and developing countries.1 Generally, we have observed a rapid development of new financial instruments, triggered by national and international liberalisation of legal systems and by the development of new communication technologies. The overall importance of financial factors for distribution, consumption, investment and growth seems to have increased considerably. These developments and the related consequences and effects have been broadly summarised as “financialisation” by some authors (Epstein, 2005; Hein, 2010; Krippner, 2005; Lavoie, 2008; Palley, 2008; Skott and Ryoo, 2008a, 2008b; Stockhammer, 2004; van Treeck, 2009a, 2009b).2 However, a major part of this literature remains somewhat opaque when it comes to the precise meaning of “financialisation”. Epstein (2005, p. 3), for example, argues rather broadly that “[. . .] financialization means the increasing role of financial motives, financial markets, financial actors and financial institutions in the operation of the domestic and international economies”. In this chapter we start with a more precise meaning and analytical definition of what “financialisation” involves. This will help us to review recent attempts to incorporate these developments into post-Keynesian models of distribution and growth in a systematic way. Seen from a post-Keynesian macroeconomic perspective, and limiting our attention to closed private economies, we suggest that “financialisation” has the following potential implications:3 1. Both the objectives and the constraints of firms as a whole may be...
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