ABSTRACT
Financial advances on the part of banks allow industry to fund not only the production of investment but also consumption goods. This chapter evaluates from Anwar Shaikh's perspective the available data on credit finance in order to account for the output fluctuations in the Spanish economy. One path-breaking line of research pursued by Shaikh since the mid-1980s has focused on formalizing the effects of external finance on accumulation as an extension of the Classical tradition. In his first model, Shaikh made borrowing and the attendant debt an explicit argument of his accumulation function. In Shaikh's first model, external finance allows firms to expand spending beyond their internal means and because of that positive excess demand emerges. Shaikh's second model seeks to generalize the theory of effective demand, provides a fuller explanation for the persistence of cycles of different duration and suggests a solution to Harrod's puzzle of the warranted path's instability.
