ABOUT BOOK

We analyse the role of dividends distributed by firms and banks, highlighting the effects of their increase on financial instability and macroeconomic dynamics. During the last decades, the financialisation of nonfinancial corporations has been characterised by a shift from a "retain and reinvest" strategy to a "downsize and distribute" strategy. We will investigate such a phenomenon by varying some of the model parameters, so simulating firms\u2019 and banks\u2019 behaviours under alternative settings. On the one hand, more distributed dividends increases agents\u2019 wealth and thus consumption may rise due to a wealth-effect. On the other hand, increasing dividends reduce firms\u2019 net worth that may result in a strong dependence of firms\u2019 production on bank credit; at the same time, if also banks distribute more dividends, then banks\u2019 capital decreases and this may result in credit rationing. As we will see, financialisation through increasing dividends impacts financial (in)stability and income distribution, with relevant consequences on macroeconomic dynamics