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

Based on this research and the observations in Figures 5 and 6, we can determine the function of capital accumulation and domestic savings. Let us consider an economy in the phase of securitization (financialization), where business profits are divided between company income whose propensity for saving is se, and domestic investors (shareholders) whose propensity for saving is sc. rD represents the payments of profits and interests abroad for debts and investments, as rD corresponds to the net transfer of resources abroad.8 Assuming that domestic businessmen channel their net profits (P-rD) into savings and/or dividends for investors, total domestic savings are as follows:9

(2)

Where P is the profit generated by the investment. Let us assume that companies plan their "planned" level of investment I*:

(3)

Assuming that planned investment corresponds to the balance between aggregate supply and aggregate demand, we solve I* = S and obtain:

(4)

where:

The endogenous adjustment to the level of accumulation is illustrated as a function of the difference of the planned accumulation rate and the current rate, and as such, the dynamic adjustment is:

(5)

By definition,

(6)

So, substituting (6) in (5), we obtain the following:,

(7)

8 Here D includes additional external debt and profits produced by fdi, among other items.

9 This model is supported by Charles, 2008.