Abstract
ABSTRACTIn this paper we analyze the impact of profits on investment in a simple Kaleckian investment model in which profits and capacity determine the level of investment. The analysis leads to the following conclusions. In the first place, the estimated impact of profits on investment behaviour in the Netherlands has diminished in the 1980s. The impact of the stock of capital on investment has remained constant in our sample period. In the second place, it can be observed that the impact of both profits and capital on investment is countercyclical. In periods of boom entrepreneurs prefer public capital markets as a source of investment funds, whereas in a recession they primarily rely on cheaper internal funds.
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