Household debt and gender: the effects of monetary policy on consumption inequality

Joana David Avritzer and Frutuoso Santana

Chapter 5 in Central Banking, Monetary Policy and Gender, 2024, pp 103-137 from Edward Elgar Publishing

Abstract: The authors introduce a post-Keynesian stock-flow-consistent (PK-SFC) model in which the household sector is divided into rentiers, middle-class earners, and low-income workers. In this model, they assume that low-income workers are the only category in the household sector for which earned income is not enough to finance their standards of living. As a result, their consumption must be partially financed by loans. They derive a supermultiplier model in which credit-financed consumption drives growth, allowing for the rate of capacity utilization to adjust to a normal level. They find an analytical solution to the short-run equilibrium of their model, as well as the steady-state rate of growth of the economy. Finally, they employ a numerical illustration of the model using parameter values based on the US economy and they consider the effects of interest rates on household income. They propose that the effort of central banks to target inflation is detrimental to both low-income and middle-class workers.

Keywords: Economics and Finance; Politics and Public Policy (search for similar items in EconPapers)
Date: 2024
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