Multiplier effect, credit and economic cycle: a neo-Kaleckian model

Marina da Silva Sanches and Gustavo Pereira Serra

EconomiA, 2025, vol. 26, issue 3, 397-414

Abstract: PurposeBuilding on evidence of a stronger multiplier effect of social benefits during Brazil’s 2015–2016 crisis, and the relative stability of consigned credit to retirees compared to active workers, we propose a demand-driven theoretical model to formalize the observed higher transfer multiplier in recessions.Design/methodology/approachWe develop a neo-Kaleckian theoretical framework to delve into the circumstances under which the multiplier effect is augmented during economic downturns. Our model incorporates two classes and household borrowing.FindingsWe find that the countercyclical nature of both credit supply and demand contributes to a more pronounced countercyclical multiplier effect (for both transfer and autonomous expenditure multiplier). Greater access to consigned credit strengthened credit’s countercyclical role, enhancing social transfers’ stabilization during crises. However, high household debt limits this effect.Originality/valueIn essence, our model formalizes the notion that social benefits, when combined with credit mechanisms, constitute a significant element in income stabilization during economic contractions. Nevertheless, elevated household debt constrains this impact.

Keywords: Fiscal multiplier; Household debt; Social benefits; Demand-led growth (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.emerald.com/econ/article/26/3/397/1249 ... economic-cycle-a-neo (text/html)
https://www.emerald.com/econ/article-pdf/26/3/397/ ... n-07-2024-0108en.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:econpp:econ-07-2024-0108

DOI: 10.1108/ECON-07-2024-0108

Access Statistics for this article

EconomiA is currently edited by Professor Joaquim Andrade

More articles in EconomiA from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().