Household Consumer Debt, Endogenous Money and Growth: A Supermultiplier-Based Analysis
PSL Quarterly Review, vol. 69 n. 278, 2016
23 Pages Posted: 7 Nov 2019
Date Written: September 12, 2016
The paper provides a simple theoretical framework to assess the macroeconomic implications of debt-fuelled consumption. In particular, the analysis is conducted through an extended super-multiplier model with endogenous credit money, which highlights the role of the autonomous components of demand, and in particular autonomous consumption, as the main drivers of economic growth. The author sketches a comparison with alternative heterodox formulations. He argues that, unlike the neo-Kaleckian models, in the model proposed here output growth adjusts to the path of debt-financed consumption. Having treated investment as fully induced, it follows that also the rate of capital accumulation adjusts to the rate of growth, which is itself determined by the evolution of autonomous demand. Finally, it is shown that the stability of the ratio of debt to debtors’ income is affected, among other things, by the growth differential between workers’ autonomous consumption (and debt) and the other autonomous components of demand, i.e. public expenditure and capitalists’ autonomous consumption.
Keywords: effective demand, economic growth, supermultiplier
JEL Classification: E11, E12, E44, G01
Suggested Citation: Suggested Citation