Inventories, Debt Financing and Investment Decisions: A Bayesian Analysis for the US Economy

The recent debate in Post-Keynesian theories of investment has mainly focused on the endogenous nature of the degree of capacity utilization, overlooking Steindl’s and Minsky’s insights on the role of inventories and debt financing in shaping investment decisions. In order to fill this gap, this paper develops a Steindl-Minsky SFC model by including inventories, as well as firm’s deposits and debt financing into the investment function. The role of investment decisions in shaping economic growth is assessed by considering a model populated by five types of economic actors: workers, firms, rentiers, commercial banks and the central bank. First, business cycle fluctuations are investigated assuming a deterministic steady growth path in the long period, in line with recent developments in heterodox growth theory. Second, we simulate the model, calibrating it for the US economy.