6533b7defe1ef96bd127595c
RESEARCH PRODUCT
Monetary circulation, the paradox of profits, and the velocity of money
Olivier Allainsubject
[SHS.ECO] Humanities and Social Sciences/Economies and financesparadox of profitsparadox of profits; circulation; endogenous money;velocity of money; stock-flow consistent approachcirculationTheoryofComputation_GENERALendogenous moneystock-flow consistent approach[SHS.ECO]Humanities and Social Sciences/Economics and Financevelocity of moneyparadox of profitscirculationendogenous moneyvelocity of moneystock-flow consistent approachdescription
Recent papers have reconsidered the paradox of profits, that is the difficulty to explain how monetary profits can be generated when firms borrow only the wage bill to finance their production. In this article, we use a stock-flow consistent approach give a solution to this paradox assuming that, when firms sell goods at prices which exceed their unit costs, the realised monetary profits are not used to pay back banks. These profits then remain in the circuit, allowing additional transactions. In a sense, profits result from their own expenditure. According to this interpretation, the velocity of money is higher than one because some monetary units are used in several transactions of goods.
| year | journal | country | edition | language |
|---|---|---|---|---|
| 2007-12-01 |