Financial Instability in Latin America:
A Minskian-Kaleckian Perspective
Tsuyoshi Yasuhara
Investment and the Capacity Utilization Rate in the Kaleckian Model ( ...continuation )


where:

 represents the real salary rate
 is labor productivity, and
 is the propensity to save


Oreiro (2004) analyzes the fact that oligopolistic entities tend to maintain excessive capacity to keep their level of production in the face of others. Lima and Meirelles (2007) show that an adjustment in capacity utilization affects the mark-up level of the interest rates of banks. If the increase in the capacity utilization rate reflects the possibility to generate additional profits, the banks prefer to lower the interest rate to support additional investment. On the other hand, if companies do not have the expected rate of high profits, the increased utilization rate causes the bank risk, as they will require a higher interest rate.

Figure 5. Rate of Accumulation [I/K(-1)]
Source: eclac, Latin America and the Caribbean: Historical Series of Economic Data > 5; Latin America and the Caribbean, National Accounts in Dollars at Current Prices, 1990-2008 > 5.2; Gross Domestic Product by Type of Expense, http://www.eclac.cl/deype/cuaderno37/datos/5.2.1.xls; Preliminary Economic Balance of Latin America and the Caribbean 2011, p. 102.



Figure 6. Capacity Utilization Rate (%)
Source: eclac, Latin America and the Caribbean: Historical Series of Economic Data > 5; Latin America and the Caribbean, National Accounts in Dollars at Current Prices, 1990-2008 > 5.2; Gross Domestic Product by Type of Expense, http://www.eclac.cl/deype/cuaderno37/datos/5.2.1.xls; Preliminary Economic Balance of Latin America and the Caribbean 2011, p. 102.