Modelling accumulation: A theoretical and empirical application of the accelerator principle under uncertainty

Abstract

In this paper we derive a theoretical macro accumulation function, which relies on the accelerator principle and is complemented by utilizing capacity and profits. This investigation also accounts for several sources and kinds of uncertainty: exchange rates for financial uncertainty, oil prices for political uncertainty and interest rates for stock market uncertainty. The latter purports to account for the relationship between physical and financial investment. We also take on board the role of conventions in an attempt to account fully for uncertainty. In doing so, we include the relevant variables as deviations from their conventional levels. In the second part of the paper we estimate the investment function, by means of the system GMM in a panel of 12 OECD economies over the period 1970-2010.

The effects of financialization on investment: evidence from firm-level data for the UK

“…Physical investment is an irreversible phenomenon. There is a path dependency that link past and future levels of accumulation, as confirmed by the previous empirical literature (Ford and Poret, 1991;Kopcke and Brauman, 2001;Orhangazi, 2008b;Arestis et al, 2012). Therefore, in all the models to be estimated, we include the lagged investment.…”

“…The vast majority of the empirical literature on the impacts of financialization on investment is based on a macroeconomic framework (Stockhammer, 2004;van Treek, 2008;Orhangazi, 2008a;Arestis et al, 2012).…”

Corporate Social Performance, Financialization, and Real Investment in US Manufacturing Firms

“…Corporate sustainability is the result of the managerial socio-environmental and governance strategy [11,58,59] aiming to implement CSR activities, which are key to enhance CSP [23][24][25]60]. For this reason, corporate sustainability crucially depends on long-term investment programs managed to create virtuous dependency between previous and subsequent levels of capital accumulation [28,54,[60][61][62][63]. Real investment is a critical driver to sustain CSR activities over time, improving both firm financial performance and CSP [64][65][66][67][68][69][70].…”

The Effects of Financialisation and Financial Development on Investment: Evidence from Firm-Level Data in Europe

“…As already said in the introduction, the vast majority of the empirical literature on the impacts of financialization on investment is based on a macroeconomic framework (Stockhammer, 2004;van Treek, 2008;Orhangazi, 2008a;Arestis et al, 2012). Regarding firm level effect of finance on investment, the seminal paper by Fazzari and Mott (1986) models the three key components of the Post-Keynesian theory of investment: a positive effect of sales (as a proxy for capacity utilization), a positive and independent effect of internal finance, i.e.…”

“…Among others, Ford and Poret (1991) 4 , Kopcke and Brauman (2001), Orhangazi (2008aOrhangazi ( , 2008b, and (Arestis et al, 2012) show the importance of the lagged accumulation in explaining its current value. Therefore, in all the models to be estimated, we include the lagged investment.…”