Abstract:
The aim of this paper is to analyze the effects of interest rates on rates of capacity utilization, capital accumulation and profit in Italy within a post-Kaleckian theoretical framework. The model employed in the analysis, which was developed by Hein/Schoder (2011), is based on monetary- authority-controlled real long-term interest rates that affect the functional distribution of income. Interest rates directly and indirectly affect the equilibrium rates of capacity utilization, accumulation and profit at a given debt-capital ratio. Our findings based on two econometric methods revealed that a higher real long-term interest rate has an adverse effect on these three endogenous variables in the Italian economy.
