Macroeconomic effects of consumer debt: three theoretical essays

Olivier Allain ()

Documents de travail du Centre d'Economie de la Sorbonne from Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne

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 generation models (search for similar items in EconPapers)
JEL-codes: E12 E2 E21 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2014-12
New Economics Papers: this item is included in nep-mac
References: Add references at CitEc
Citations: View citations in EconPapers (1)

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ftp://mse.univ-paris1.fr/pub/mse/CES2014/14087.pdf (application/pdf)

Related works:
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:mse:cesdoc:14087

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