Publication Type

Journal Article

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

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

Additional URL

https://doi.org/10.4337/ejeep.2014.01.03

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