Abstract

http://ssrn.com/abstract=2210994
 


 



A Theory of Aggregate Consumption


Yun Kim


Trinity College (Hartford CT)

Mark Setterfield


Trinity College

Yuan Mei


Trinity College (Hartford CT) - Department of Economics

January 1, 2013

Trinity College of Economics Working Paper 13-01

Abstract:     
We develop a Keynesian model of aggregate consumption. Our theory emphasizes the importance of the relative income hypothesis and debt-finance for understanding household consumption behavior. It is shown that particular importance attaches to how net debtor households service their debts, and that the treatment of debt servicing commitments as a substitute for savings by these households creates the potential for “sudden stops” in consumption spending (and hence aggregate demand). The implications for aggregate consumption of changes in the distribution of income and changes in the composition of employment are also explored.

Number of Pages in PDF File: 30

Keywords: consumption, household borrowing, household debt, relative income hypothesis

JEL Classification: E12, E21

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Date posted: February 3, 2013  

Suggested Citation

Kim, Yun and Setterfield , Mark and Mei, Yuan, A Theory of Aggregate Consumption (January 1, 2013). Trinity College of Economics Working Paper 13-01. Available at SSRN: http://ssrn.com/abstract=2210994 or http://dx.doi.org/10.2139/ssrn.2210994

Contact Information

Yun Kim
Trinity College (Hartford CT) ( email )
300 Summit Street
Hartford, CT 06106
United States
Mark Setterfield (Contact Author)
Trinity College ( email )
300 Summit Street
Department of Economics
Hartford, CT 06106
United States
Yuan Mei
Trinity College (Hartford CT) - Department of Economics ( email )
United States
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