Publication Type
Journal Article
Version
publishedVersion
Publication Date
4-2014
Abstract
We develop a Keynesian model of aggregate consumption. Our theory emphasizes the importance of the relative income hypothesis and debt finance for understanding household consumption behavior. It is shown that particular importance attaches to how net debtor households service their debts, and that the treatment of debt-servicing commitments as a substitute for savings by these households creates the potential for 'sudden stops' in consumption spending (and hence aggregate demand).
Keywords
consumption, household borrowing, household debt, relative income hypothesis
Discipline
Economic Theory | Macroeconomics
Research Areas
Macroeconomics
Publication
European Journal of Economics and Economic Policies: Intervention
Volume
11
Issue
1
First Page
31
Last Page
49
ISSN
2052-7764
Identifier
10.4337/ejeep.2014.01.03
Publisher
Edward Elgar Publishing
Citation
KIM, Yun K.; SETTERFIELD, Mark; and MEI, Yuan.
A theory of aggregate consumption. (2014). European Journal of Economics and Economic Policies: Intervention. 11, (1), 31-49.
Available at: https://ink.library.smu.edu.sg/soe_research/2183
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.4337/ejeep.2014.01.03