Asimakopulos - Finance, Liquidity, Saving, and Investment

Journal of Post Keynesian Economics
ISSN: 0160-3477 (Print) 1557-7821 (Online) Journal homepage: http://www.tandfonline.com/loi/mpke20
Finance, Liquidity, Saving, and Investment
A. Asimakopulos
To cite this article: A. Asimakopulos (1986) Finance, Liquidity, Saving, and Investment, Journal
of Post Keynesian Economics, 9:1, 79-90, DOI: 10.1080/01603477.1986.11489601
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A. ASIMAKOPULOS
Finance, liquidity, saving, and

investment
Downloaded by [University of California Santa Barbara] at 23:15 09 May 2016
Introduction
The post Keynesian approach to economic theory builds on Keynes's
emphasis on the key role of investment in determining the level and rate
of growth in economic activity (this emphasis is also to be found in
Kalecki's writings). Desired saving is brought into equality with in-
vestment as a result of both the multiplier and income distribution
effects of changes in investment. It is this investment which determines
saving, rather than the reverse.
For the rate of investment in fixed capital to increase, entrepreneurs
must be confident enough about the prospects of future profitability to
commit themselves to the development and ownership of productive
facilities, which require the provision of finance by banks, the expendi-
ture of funds, and the assumption of liabilities by entrepreneurs that
reduce their liquidity. 1 This requirement for finance-whose availabil-
ity is a necessary condition for an increase in investment-was first
treated explicitly in connection with a theory of aggregate demand by
The author is a Professor in the Department of Economics at McGill University.

IShackle (1983) has put this very succinctly. "Resources are liquid when they do
not depend, for the retention of their value, on the presence and persistence of cir-
cumstances confined within a narrow range of variation. Resources are liquid when
they are uncommitted to a highly specialized venture. But production is the activity
of specializing materials and means to particular technical or aesthetic purposes.
There is a conflict between the retention of liquidity and the giving of employment.
The business man desires liquidity and refrains from giving employment, when he
feels that he cannot exclude the possibility of disastrous losses as the sequel of any
available venture" (p. 114).
10urnal of Post Keynesian Economics/Fall 1986. Vol. IX. No. I 79

80 JOURNAL OF POST KEYNESIAN ECONOMICS
Kalecki in 1935 and by Keynes in 1937. 2 The banking system thus has a
crucial role in making possible an increase in investment, since it must
supply the money needed to enable the investing firms to increase their
purchases of capital goods, as well as to supply the money required to
meet the higher transactions demand which follows the increase in
economic activity brought on by higher investment. 3
Only a liquidity constraint

Kregel (1984-85) appears to give the banking system overriding im-
portance in determining output by arguing that there is no "constraint
on current output other than a monetary constraint, or better, a liquidity
constraint" (p. 139), an argument that he identifies with the "post
Keynesian position."4 He states that "[o]nce it is accepted that ex post
savings and investment are always equal at any level of employment, it
is possible to argue that . . . even in conditions of equilibrium [when
there are unemployed resources] .... [a]ll that is necessary to bring
about expansion is a reduction in the money rate of interest" (p. 143). It
is true that, if investment increases in such circumstances, output and
employment (and possibly prices as well) will also increase, but the
post Keynesian approach does not necessarily assume that investment
will increase in all such cases.
2Joan Robinson in a Memorial Lecture on Kalecki noted similarities in the treatment

of finance by Keynes to that found in Kalecki's 1935 Econometrica article. "When
Kalecki came to Cambridge in 1936, we told Keynes about him, but he was not
much impressed. His own ideas were in full spate (he was thinking about rewriting
the General Theory in a completely different way) and he had not patience with any-
one else's. He picked on a phrase in the Econometrica paper that seemed to him too
'monetarist,' though in fact it contained a point of view which he later came to
himself' (Robinson, 1980, p. 187).
3An increase in bank credit is required to make possible an increase in investment,
as Kalecki (1935, p. 344) noted, both to provide funds for the increase in invest-
ment itself and to meet the increased transactions demand for money resulting from
the consequent increases in economic activity and prices. In the present context we
are concerned, as in Asimakopulos (1983), only with the increased demand for
money for the financing of an increase in investment. This abstraction from the in-
crease in transactions demand for the purpose of this analysis does not imply, as is
stated by Kregel (1984-85, p. 150): "the assumption that transactions demands are
independent o/the increased money incomes (italics in original).
4The term "liquidity constraint" must be handled with care if it is to be anything
other than definitional, since, as pointed out in footnote 1, it may refer to the lack
of readiness under current conditions to invest in fixed capital. The demand for li-
quidity, or the term "liquidity position," could be applied to different groups, each
FINANCE, SAVING, AND INVESTMENT 81
Kregel's statement is based on very special assumptions that he does

not specify, and he gratuitously limits the scope of the post Keynesian
tradition by implicitly tying it to these assumptions. Reference to a
reduction in "the" money rate of interest is insufficient when consider-
ing the conditions necessary for an increase in the rate of investment,
since whatever reduction occurs must be sufficient to induce entrepre-
neurs to take this step in the face of uncertainty over future conditions.
Current excess productive capacity and their pessimistic outlook may
be such that a reduction in the rate of interest has minor effects on

investment, at least for some time. As Keynes wrote in his June 1937
paper, "Alternative Theories of the Rate of Interest" (reprinted in
Keynes, 1973, pp. 201-215): "The control of finance is, indeed a
potent, though sometimes dangerous, method for regulating the rate of
investment (though much more potent when used as a curb than as a
stimulus)" (pp. 210-211). There is also the problem of the term struc-
ture of interest rates-the relation between short- and long-term rates
of interest-that can change and that may make reference to "the" rate
of interest misleading.
The two-fold process of financing investment

Keynes formally recognized in his December 1937 Economic Journal
paper, "The 'Ex Ante' Theory of the Rate of Interest" (reprinted in
Keynes, 1973, pp. 215-223), that an entrepreneur in making a decision
to invest "has to be satisfied on two points: firstly, that he can obtain
sufficient short-term finance during the period of producing the invest-
ment; and secondly, that he can eventually fund his short-term
obligations by a long-term issue on satisfactory conditions" (p. 217).
There are thus, in principle, at least two rates of interest involved in
dealing with conditions required for an increase in investment. Firms
may finance an increase in their rates of fixed investment through
with its own method of satisfying this demand or regulating its position. It may re-
fer to the position of an entrepreneur intending to purchase goods, with his demand
for liquidity at an end as soon as the purchase is made. It may refer to the position
of an entrepreneur who has invested in working capital in anticipation of an in-
crease in demand and whose liquidity is restored when the goods he has produced
are sold. It might refer to the position of an entrepreneur who has invested in fixed
capital on the basis of short-term credits and whose liquidity position is improved
when he has funded these debts through the sale of long-term securities or equity.
Finally, it might refer to the position of the banking system, which becomes more
"unliquid" (Keynes, 1973, p. 219) as it increases its assets and liabilities.
short-term bank loans, S when they expect to be able to fund these short-
term loans by subsequent long-term issues at reasonable terms. They
are, in this way, speculating on the term structure of interest rates.
Alternatively, they may obtain long-term finance in the new issue
market, but in that case, since investment and saving have not yet
increased, it is those purchasing the securities with increased bank
loans who are speculating on the term structure of interest rates. They
are borrowing short and lending long.
Kregel confuses the question of the need for both short- and long-
term finance. He makes a one-sided interpretation of Keynes's state-
ment that investment finance "may be provided either by the new issue
market or by the banks; which it is makes no difference" (Keynes,
1973, p. 208) when he writes: "In his exposition Keynes assumed that
the extra money-finance required by firms in advance of investment
expenditure is raised by issue of securities in the long-term capital
market ... " (Kregel, 1984-85, p. 149). Not only did Keynes give the
possibility that investing firms might initially borrow short term equal
emphasis in his June 1937 paper, from which the quotation given at the
beginning of this paragraph is obtained, but it was regarded as the
"characteristic" process in Keynes's December 1937 article (Keynes,
1973, p. 217). He recognized in that article the need to extend his
treatment of finance and investment. Keynes wrote: "[Ohlin] com-
pelled me to attend to an important link in the causal chain which I had
previously overlooked, and he has enabled me to make an important
improvement in my analysis" (pp. 215-216). This "important link"
was the explicit recognition of the increased bank credit required to
make possible an increase in investment in fixed capital. In making this
"improvement" Keynes refers to the two-fold process for an increase
in investment, where firms first obtain short-term finance with the
expectation of being able to eventually fund, at reasonable terms, these
short-term obligations by a long-term issue (p. 217).6 But quite apart
5Use of short-term bank loans is the normal way in which firms finance increases in
their working capital when they foresee an increase in demand for their output.
Graziani (1984) discusses the financing of working capital as part of his consider-
ation of Keynes's "revolving fund of finance."
6Minsky (1982b) also refers to the financing of investment "as a two step process,
in which short-term borrowings are used to finance investment in process and inter-
nal funds and longer term debts are used to finance the holding of the capital assets
that result from investment" (p. 10). Short-term credits might be used by the in-
vesting as well as by the capital-goods producing firms. For the latter, it is the nor-
mal way of financing the increase in working capital required to increase output,
while the former might use short-term credit to make initial payments before turn-
ing to the securities market.
from the interpretation of Keynes's statements, a sequential process is

involved-whether firms obtain their initial finance through short- or
long-term obligations-since the increased saving, which is potentially
available to fund the firms' short-term borrowing, or to relieve the
pressure on the capital market when long-term issues are used to obtain
the initial investment finance, is only available after the full multiplier
effect is achieved. This increase in desired saving does not occur
simultaneously with the expenditure of the newly acquired increase in
investment finance, even though ex post investment and ex post saving

are always equal by definition.7 It takes place only when the full
multiplier effects of an increase in investment have worked themselves
out.
This need for the passage of time for the realization of full multiplier
effects, as well as the requirement for both short- and long-term fi-
nance if investment is to be increased, was recognized by Kaldor in his
important 1939 Review ofEconomic Studies paper on "Speculation and
Economic Stability" (reprinted in Kaldor, 1960). He assumed that
firms obtained long-term finance for their increased investment, be-
fore undertaking these investments, through the sale of bonds in the
capital market. Since the increase in investment, income, and saving
are still in the future, these long-term funds have to be provided by
intermediaries or (Kaldor's term) speculators who obtain the necessary
cash by increasing their bank loans. The adverse consequences of an
unfavorable change in the term structure of interest rates would be
borne by these speculators. Kaldor thus provided a mechanism where-
by the banks' willingness to lend more cash at the existing (short-term)
rate of interest-a necessary condition according to Keynes for "the
transition from a lower to a higher scale of economic activity" (1973,
p. 222)-leads immediately to the long-term funds needed by the in-
vesting firms. For this expansion to proceed smoothly, however, these
7It is important not to use expressions which may foster confusion between the
equality of saving and investment as a definitional requirement, and their equality as
an eqUilibrium relation (cf. Robinson, 1965, p. 5). The former holds at all times,
no matter whether investment has been increasing or decreasing, even if the in-
crease in investment by expanding firms is offset by an unintended rundown in the
inventories of other firms. Kregel's reference to the "instantaneous" expansion of
both income and employment "given sufficient monetary ease" when there are "re-
dundant resources" (Kregel, 1984-85, p. 147) can be misleading. An increase in
investment activity by some firms, fostered by monetary ease, may initially have no
net effect on income and employment, if short-term expectations of selling firms
were mistaken and the value of inventories fell by an equal amount. Output and em-
ployment would only increase as firms acted to rebuild inventories, and the full ex-
tent of the increase in income would only take place over time as newly hired work-
ers spent their wages, which in turn would lead to additional increases in output and
employment and to further increases in spending, and so on.
capital market participants must be prepared to continue absorbing

additional long-term securities while borrowing short-term, at a
roughly unchanged term structure, until the increase in desired saving
becomes equal to the increase in investment. Kaldor concluded that
"Mr. Keynes' General Theory, therefore, in so far as it concerns his
theory of the rate of interest and the theory of the multiplier, is rather in
the nature of a 'special case' " (Kaldor, 1960, p. 52), because of this
dependence on speculative activity to maintain the term structure of
interest rates roughly unchanged, while the demand for long-term

finance and the supply of short-term finance are being increased.
Kaldor illustrated, by means of a numerical example, the need for
the absorption of long-term securities by speculators if the rate of
investment is to be increased. The extent of the necessary absorption is
limited by the multiplier effects of the increased investment. The in-
crease in the rate of investment is 1 million per week, and investment
is maintained at this higher level indefinitely. The time required for the
full multiplier process is explicitly recognized by using period analy-
sis,8 with the increase in income in one "week" being followed by an
increase in consumption expenditure in the next week (the economy's
marginal propensity to save is taken to be 25 percent). The spending of
the 1 million borrowed from speculators in the first week leads to an
increase of desired saving of 250,000 in the second week (which
Kaldor assumes is used to purchase long-term bonds). Speculators are
thus only required to absorb 750,000 of long-term securities in order
to provide the finance for the 1 million per week extra in investment
expenditure. In the third week they need provide only three-quarters of
their contribution in the second week, or 562,500 and so on. The total
amount of long-term finance speculators will be required to provide is
equal to the product of the reciprocal of the propensity to save and the
maintained increase in investment. It is equal to 4 million in this case.
This is also the amount of the increase in short-term bank credit to
8Kregel (1984-85, p. 148) writes that "Asimakopulos ... conducts his analysis in
terms of periods (despite Keynes's 1937 warning to the contrary)." The reference is
to Keynes's June 1937 "Alternative Theories of the Rates ofInterest," but this ar-
ticle contains no warning about the use of "periods. " Keynes noted that the distinc-
tion between investment ex ante and investment ex post "is very useful in some
connections" (1973, p. 213, n. 2), even though it is difficult to make precise the
comparison between the two concepts "because aggregate ex post investment in any
period cannot be related to, or compared with, the aggregate ex ante investment at
any specified previous date" (p. 2IOn). What he warned against is "the concept of
ex ante saving, I can attach no sound sense to it" (p. 2IOn). No use of this concept
is made in Asimakopulos (1983).
speculators, which they use to purchase the long-term securities. (We

are, as noted in footnote 3, abstracting from the required increase in the
money supply for transactions purposes when investment is increased.)
A higher propensity to save would thus ease the pressure on the capital
market of increased investment and facilitate the price-stabilizing influ-
ence of speculators in the long-term bond market.
Kaldor judged that in a closed economy' 'the degree of price-stabi-
lizing influence, though not perhaps infinite, is very much larger in the
case oflong-term bonds than for any other commodity; and this means
that the Keynesian theory, though a 'special case,' gives, nevertheless,
a fair approximation to reality" (Kaldor, 1960, p. 52). This assessment
is very much affected by economic conditions at the time (1939) when
Kaldor's article was written. Prices and wages had been relatively
stable, or even falling, in the 1930s, stocks of raw materials were
plentiful, and there was excess productive capacity in many industries.
Increases in both investment and consumption demand could be readily
accommodated without serious price effects. In the absence of infla-
tionary fears, the term structure of interest rates could be expected to
remain relatively stable. In other circumstances, as we shall see below,
a higher propensity to save may facilitate an increase in investment.
Kaldor noted that Keynes's statement "the investment market can
become congested through shortage of cash. It can never become con-
gested through shortage of saving" (1973, p. 222) does not hold in an
open economy. Domestic saving will not increase by the amount of
domestic investment, because part of the increased expenditure is di-
rected to foreign goods (and increases in foreign incomes). If foreign-
ers do not use their trade surplus to purchase long-term domestic
bonds, then eventually the "long-term rate rises relatively to the short-
term rate simply because, owing to a shortage of savings, speculators
are required to expand continuously the size of their commitments: and
there are limits to the extent to which this is possible" (Kaldor, 1960, p.
51). The expectation of government deficits that are large in relation to
domestic saving would also tend to increase long-term interest rates,
constraining investment even if short-term interest rates were kept
relatively low by monetary expansion (Asimakopulos, 1983, p. 231).
The "revolving fund of finance"

Keynes's discussion of the "revolving fund of finance" is confused
because he refers in different places to different entities. There is the
reference to me demand for finance of an entrepreneur who anticipates

an increase in demand for his goods (Keynes, 1973, p. 221), with this
demand for cash being "automatically at an end as soon as the finance
is expended" (p. 230), but in other places the liquidity position of the
banking system is at issue. This is the case in a key passsage in "The
'Ex Ante' Theory of the Rate of Interest" where reference is made to
the "banks, which organise and manage a revolving fund of liquid
finance" and whose "readiness to become temporarily unliquid is
available to be used over again" (Keynes, 1973, p. 219). But for the
banks to become temporarily unliquid again, something must happen to
restore their initial liquidity position. This "something" is the repay-
ment of bank debt equal to the initial increase in loans, a repayment that
would normally be made out of saving directed to the purchase of
securities, as the issuing firms use the proceeds to retire short-term
debt. This is recognized in Davidson's re-statement of Keynes's posi-
tion: "The additional short-term finances obtained from the banking
system and used initially to pay for the resources committed to the
increment in capital goods output becomes a revolving fund which is
being constantly extinguished when firms repay their bank loans"
(Davidson, 1978, p. 276). In the same vein Davidson had noted: "The
revenue from the sale of new placements . . . will be sufficient to pay
off the outstanding short-term bank loans, thus making the bank credit
available again to finance another project" (p. 276).9 When the in-
creased rate of investment is maintained, as in Kaldor's example pre-
sented in the preceding section, the "lack of liquidity" that made
possible this increase is never made good, but its extent is limited by the
increased saving, which keeps extinguishing old bank debts as new
ones are created. A steady rate of increase in investment would require
ever-increasing bank debt. There is, of course, no particular advantage
for the banking system in maintaining its initial liquidity position. It
9Davidson also recognized the importance of a relatively stable term structure of in-
terest rates if the availability of short -term finance is to foster higher investment. He
noted that, when new issue underwriters fear a fall in the prices of long-term securi-
ties, they may be "reluctant to aid in the initial financing of the net investment
projects .... Consequently, financial market conditions, which may be self-im-
posed by financial institutions, can restrict growth even if entrepreneurs have the
proper animal spirits" (Davidson, 1978, p. 276). The importance of long-term fi-
nance for investment purposes has been stressed by Minsky. "While the banking
system does provide business with short-term financing ... the financing of invest-
ment and of capital asset ownership involves longer term equity and debt
instruments" (Minsky, 1982a, p. 99).
grows and profits by increasing its assets and liabilities, as long as only
a very small proportion of loans turns sour.
Thriftiness, finance, and investment

For investment to increase, entrepreneurs must obtain the finance need-
ed to carry out their investment decisions. An effective investment
decision is thus a financed decision. The degree of thriftiness in an
economy could affect, under certain circumstances, the availability of

finance for investment and thus affect the investment that can be carried
out even when the desire to accumulate is strong. For example, in Joan
Robinson's model of accumulation there is, given the propensity to
save, an inverse relation between the rate of accumulation and the real-
wage rate. This relation helps trigger an "inflation barrier" that is
brought into operation when the sharp increases in prices follow rapid-
ly rising money-wage rates, as workers try to protect their real wages.
She wrote that a limit to the possible investment' 'is set by the level to
which it is possible to force down real wages" (Robinson, 1962, p. 13).
At this level "an irresistible demand for higher money wages makes
itself felt" (p. 42), resulting in inflationary conditions. Further,
"when there is a sharp rise in the demand for money such as occurs in
inflationary conditions, they [the monetary authorities] raise the rate of
interest to a level which checks investment" (pp. 43-44). A higher
propensity to save under these conditions, for example, lower con-
sumption out of profits, allows firms to achieve a higher rate of accu-
mulation before the inflation barrier is reached. 10
There is nothing absolute about the financial constraint on invest-
ment since there is a priori no particular value for the long-term rate of
interest that can be said to result in a substantial downturn in invest-
ment. A strong urge to accumulate encouraged by the experience of
rising profits, fears of losing market shares in the face of potential
inroads by competitors, and other reasons could sustain investment in
IORobinson used the term "bastard golden age" for the steady growth situation
where the fear of inflationary pressure results in financial checks that keep invest-
ment below the rate that would produce full employment. "A bastard golden age
sets in at a fairly high level of real wages when organised labour has the power to
oppose any fall in the real-wage rate. Any attempt to increase the rate of accumula-
tion, unless it is accompanied by a sufficient reduction in consumption out of prof-
its, is then frustrated by an inflationary rise in money-wage rates. In such a situa-
tion, the rate of accumulation is limited by the 'inflation barrier' "(Robinson, 1962,
pp.58-59).
the face of monetary stringency and high interest rates. Financial con-
ditions that would cause a downturn in a particular historical situation
may be insufficient to restrain investment in another. There is implicit
recognition of this in Joan Robinson's comments on finance in connec-
tion with her theory of accumulation. She wrote: "For purposes of our
model [finance] is best treated, along with the 'animal spirits' of the
firms, as an element in the propensity to accumulate of the economy"
(Robinson, 1962, p. 43). There could obviously be some trade-off
between buoyant "animal spirits" (that can influence the lending prac-
tices of financial institutions, as well as the investment decisions of
firms) and stringent conditions of finance, which can maintain the rate
of accumulation. 11
Conclusion
The post Keynesian approach to economics, which is based on the
works of Keynes and Kalecki, emphasizes the importance of invest-
ment behavior in determining the growth and cyclical movements of
capitalist economies. This behavior is difficult to predict or model,
because it is the factors "which determine the rate of investment which
are most unreliable, since it is they which are influenced by our views
of the future about which we know so little" (Keynes, 1973, p. 121).
The availability of increased finance, both short and long term, is
needed to make possible higher investment, but the provision of long-
term finance at reasonable terms, and thus the achievement of higher
investment, may, in certain circumstances, be contingent on the expec-
tation of a substantial increase in the flow of savings into the securities
markets. The post Keynesian position-as exemplified by the writings
of Kaldor and Robinson referred to here-is broader than the view of it
taken by Kregel. Credit expansion by the banks may not be sufficient to
keep long-term interest rates from rising when domestic savings are
insufficient to finance increased investment, either because of the re-
sulting trade deficits or because of the diversion of savings to finance
llInvesting firms might also be prepared to change the usual proportion of short-
and long-term credits in financing increased investment if long-term rates of inter-
est are high relative to short-term rates. The American financial economist Henry
Kaufman noted in an interview that in the 1984-85 period the high long-term rates
led American firms to "take greater interest rate risks" by financing' 'many of their
requirements through floating interest rates or through short-term credit instru-
ments, such as commercial paper" (The Financial Post, Toronto, March 9, 1985).
large government deficits. When the economy is moving toward fuller

utilization of resources, the rising money-wage rates and prices may
cause the monetary authorities to restrain the increase in the money
supply and thus put a brake on investment. In both cases a higher
propensity to save may assist the achievement of a higher rate of
investment.
The post Keynesian approach recognizes the importance of histori-
cal and institutional factors in determining the performance of an
economy over any period of time. There are occasions with consider-
able unemployment and excess productive capacity, where investment
is low and entrepreneurs are very cautious and fearful of committing
themselves to new projects. An increase in the propensity to consume-
a lower propensity to save, in such cases-would increase effective
demand, output, and eventually investment. The necessary finance,
both short and long term, for this increased investment could be avail-
able at reasonable terms and without concern about the adequacy of the
flow of savings. At other times, when the urge to accumulate is high
and inflationary pressures are strong, or when large projected govern-
ment deficits raise concern over the balance between expected savings
and the demand for long-term finance, an increase in the propensity to
save would ease financial constraints and allow higher investment. The
possible relations between finance, investment, and saving in the post
Keynesian approach are thus complex. They very much depend on
particular historical circumstances, and no general statement about
their relationship which does not recognize these circumstances can
adequately represent the post Keynesian position.
REFERENCES
Asimakopulos, A. "Kalecki and Keynes on Finance, Investment and Saving." Cambridge
Journal of Economics, 1983, 7,221-233.
Davidson, Paul. Money and the Real World. 2nd ed. London: Macmillan, 1978.
Graziani, Augusto. "The Debate on Keynes' Finance Motive." Economic Notes. 1984. 13. 5-
32.
Kaldor, Nicholas. Essays on Economic Stability and Growth. London: Duckworth. 1960.
Kalecki. M. "A Macrodynamic Theory of Business Cycles." Econometrica. 1935.3. 327-
344.
Keynes, John Maynard. The General Theory and After. Part ll: Defense and Development. In
The Collected Writings of Keynes. Ed. by Donald Moggeridge. Vol. 14. London: Macmillan
for the Royal Economic Society. 1973.
Kregel, J. A. "Constraints on the Expansion of Output and Employment: Real or Monetary?"
Journal of Post Keynesian Economics. Winter 1984-85. 7 (2). 139-152.
Minsky, Hyman P. Can "It" Happen Again? Armonk, N.Y.: M. E. Sharpe, Inc., 1982a.
- - - . "The Potential for Financial Crises." Working Paper No. 46, Department of Eco-
nomics, Washington University, St. Louis, Missouri, 1982b.
Robinson, Joan. Essays in the Theory of Economic Growth. London: Macmillan, 1962.
- - - . Collected Economic Papers. Vol. 3. Oxford: Basil Blackwell, 1965.
- - - . Collected Economic Papers. Vol. 5. Oxford: Basil Blackwell, 1980.
Shackle, G. L. S. "A Student's Pilgrimmage." Banca Nazionale Del Lavoro Quarterly Re-
view, June 1983, 107-116.

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Journal of Post Keynesian Economics

ISSN: 0160-3477 (Print) 1557-7821 (Online) Journal homepage: http://www.tandfonline.com/loi/mpke20

Finance, Liquidity, Saving, and Investment

To link to this article: http://dx.doi.org/10.1080/01603477.1986.11489601

Published online: 04 Nov 2015.

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Finance, liquidity, saving, and

The author is a Professor in the Department of Economics at McGill University.

10urnal of Post Keynesian Economics/Fall 1986. Vol. IX. No. I 79

Only a liquidity constraint

2Joan Robinson in a Memorial Lecture on Kalecki noted similarities in the treatment

Kregel's statement is based on very special assumptions that he does

be such that a reduction in the rate of interest has minor effects on

The two-fold process of financing investment

from the interpretation of Keynes's statements, a sequential process is

investment finance, even though ex post investment and ex post saving

capital market participants must be prepared to continue absorbing

interest rates roughly unchanged, while the demand for long-term

speculators, which they use to purchase the long-term securities. (We

The "revolving fund of finance"

reference to me demand for finance of an entrepreneur who anticipates

Thriftiness, finance, and investment

economy could affect, under certain circumstances, the availability of

large government deficits. When the economy is moving toward fuller

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