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Household debt and housing bubbles: a Minskian approach to boom-bust cycles

Soon Ryoo

Journal of Evolutionary Economics, 2016, vol. 26, issue 5, No 3, 1006 pages

Abstract: Abstract This paper examines macroeconomic dynamics of household debt and housing prices in a two-class economy. Drawing on Minsky’s insights into financial instability and cycles, our framework combines household debt dynamics with behavioral asset price dynamics in a Keynesian macro model. We show that endogenous boom-bust cycles can emerge through the interaction between household debt and housing price dynamics. In this model, a long period of housing bubbles is characterized by increases in the profit share and the workers’ indebtedness for most of the time. The long waves are combined with a Kaldorian model of short-run business cycles.

Keywords: Household debt; Housing bubbles; Limit cycle; Financial instability hypothesis; Stock-flow consistency (search for similar items in EconPapers)
JEL-codes: D14 E12 E25 E32 E44 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (39)

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DOI: 10.1007/s00191-016-0473-5

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