Circuit with Multi-period Credit

Abstract

We develop a circuit model in which firms finance part of their investment using bank credit issued and reimbursed over several periods. The model has three main properties: profits originate in the overlap of investments financed by bank credit that remain to be repaid; Say's Law is not verified, even when households do not save within a period; and the rate of investment must increase and then level off over time to avoid an overproduction crisis.

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