BPE: Financing Investment under Fundamental Uncertainty and Instability: A Heterodox Microeconomic View

Tae-Hee Jo. 2015. “Financing Investment under Fundamental Uncertainty and Instability: A Heterodox Microeconomic View,” Bulletin of Political Economy, Vol. 9, No. 1, pp. 33-54.

Abstract

This study inquires into investment and finance decisions as they are related to other decisions within the going business enterprise embedded in the monetary social provisioning process. When it comes to investment and finance, business enterprises’ strategic decisions often escape notice by heterodox macroeconomists. In place of strategic decisions, financing and investment are mainly looked at through the operation of the financial market in which the supply of and demand for investment funds are coordinated by the prices of funds. Consequently, heterodox macroeconomic theory of investment and finance deals mainly with external financing. In this article I argue that the strategically generated internal means of finance is the main source of fixed investment, especially when the economy is in recession or economic instability is increasing. The positive empirical relationship between external finance and fixed investment is hardly discerned. Even the financialization of non-financial corporations in recent decades has not reduced the importance of internal financing over external financing.

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Dr. Tae-Hee Jo

Economics and Finance Department
SUNY Buffalo State
1300 Elmwood Ave.
Buffalo, NY 14222
USA

o: Classroom Building B333
t: 716-878-3374
e: taeheejo [at] gmail.com
e: joth [at] buffalostate.edu

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