Income redistribution, consumer credit, and keeping up with the Riches

Christopher Krause and Mathias Klein

VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy from Verein für Socialpolitik / German Economic Association

Abstract: In this study, the relation between consumer credit and real economic activity during the Great Moderation is studied in a dynamic stochastic general equilibrium model. Our model economy is populated by two different household types. Investors, who hold the economy's capital stock, own the firms and supply credit, and workers, who supply labor and demand credit to finance consumption. Furthermore, workers seek to minimize the difference between investors' and their own consumption level. Qualitatively, an income redistribution from labor to capital leads to consumer credit dynamics that are in line with the data. As a validation exercise, we simulate a three-shock version of the model and find that our theoretical set-up is able to reproduce important business cycle correlations.

JEL-codes: E21 E32 E44 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/112816/1/VfS_2015_pid_277.pdf (application/pdf)

Related works:
Journal Article: Income Redistribution, Consumer Credit, and Keeping Up with the Riches (2020)
Working Paper: Income Redistribution, Consumer Credit, and Keeping up with the Riches (2019)
Working Paper: Income Redistribution, Consumer Credit,and Keeping up with the Riches (2014)
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:zbw:vfsc15:112816

Access Statistics for this paper

More papers in VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy from Verein für Socialpolitik / German Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().