Abstract
J. Schmpeter once explained depictively the accumulation process of capital focusing on entrepreneur and banker. Its formal modeling and analysis has long been a question. The reason is the difficulty of modeling which grasps the essential characteristics of both real and financial sectors, while keeping the system to be operative. We make up such a model and analyze the instability of balanced growth path with "Harrod-Okishio" type investment function and M. Kalecki type bank lending function. The main results are as the followings: 1. In temporary equilibrium, if the rate of investment increases, interests rate rises, bank loan increases, its profit increases and its rising rate accelerates. 2. On medium term equilibrium path, the higher the saving rate is, the higher the growth rate is, the higher the rates of profit of both sector rise, the higher the interests rate is, and the higher the rate of monetary sector to real sector rises. 3. The balanced growth path with "Harrod-Okishio" type, which is generally said to be instable, becomes stable, if its steady growth rate is higher and the elasticity of interests to lending is high enough. This is because, as the share of interests in total profit reacts sensitively to the change of investment rate in disequilibria, the realized profit rate of real sector does not react positively to the rate of investment rate. 4. The conclusion of 3 is based on the linear approximation around the neighborhood of equilibrium. So, this does not exclude upward stability and downward instability of the system as a whole. But, on the contrary, taking account of the non-linear credit cost function, it suggests the opposite.
