Macroeconomic effects of consumer debt: three theoretical essays

Olivier Allain ()

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Abstract: Post-Keynesian economists have quite recently begun to draw attention to the consumer debt. However, as they omit the principal payment, they implicitly assimilate this debt as perpetual loans. The goal of this article is mainly methodological. We first develop a ‘Keynesian' overlapping generations framework assuming that people borrow when they are young and service their debt (interests and principal) in the following periods. Defaults on the principal are also taken into account. We then analyze the theoretical properties of the equilibriums (multiplier effect, stability conditions) resulting from the introduction of this framework in three types of models that differ in regard of who are the debtors and who are the creditors: workers can borrow from capitalists (essay 1) or from their peer (essay 2); capitalists can borrow from their peer (essay 3).

Keywords: consumer debt; Keynesian models; equilibrium instability; overlapping generations models (search for similar items in EconPapers)
Date: 2014-12
New Economics Papers: this item is included in nep-mac and nep-pke
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-01147612
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Published in 2014

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Working Paper: Macroeconomic effects of consumer debt: three theoretical essays (2014)
Working Paper: Macroeconomic effects of consumer debt: three theoretical essays (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-01147612

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