EconPapers    
Economics at your fingertips  
 

The Supermultiplier-Cum-Finance. Economic Limits of a Credit Driven System

Óscar Dejuán () and John McCombie
Additional contact information
Óscar Dejuán: University of Castilla – La Mancha (UCLM)

No CSWP32, Centro Sraffa Working Papers from Centro di Ricerche e Documentazione "Piero Sraffa"

Abstract: Credit explosion, debt overhang and asset bubbles, of the size observed in the period 1995-2008, have been a recurrent problem of advanced capitalism. In this paper we analyse the causes and consequences of over-indebtedness from a supermultiplier model that takes into account the debt-service. We contend that the accelerator of investment is a stable and stabilizing mechanism when investment depends on the expected increases in “permanent” demand. The problems of instability are rooted in the consumption-multiplier when it does not depend on fixed parameters (like the tax rate) but on coefficients that evolve endogenously; namely the debt-burden and the debt service. To control the financial sources of this instability, monetary authorities should prevent that credit rises systematically above the growth of nominal GDP.

Keywords: Financial Instability; Supermultiplier; Post-Keynesian Economics; Sraffian Economics (search for similar items in EconPapers)
JEL-codes: E11 E12 E32 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2018-07
New Economics Papers: this item is included in nep-fdg, nep-mac and nep-pke
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.centrosraffa.org/public/0c0e869e-9063-41a0-a597-9ef0337ec1c8.pdf Full text (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:ris:sraffa:0032

Access Statistics for this paper

More papers in Centro Sraffa Working Papers from Centro di Ricerche e Documentazione "Piero Sraffa" Contact information at EDIRC.
Bibliographic data for series maintained by Saverio M. Fratini ().

 
Page updated 2020-03-29
Handle: RePEc:ris:sraffa:0032