Long-run consequences of debt in a stock-flow consistent network economy
AbstractIn this paper we develop a theoretical framework to analyze the long-run behavior of an economy characterized by a regime of persistent debt. We introduce a stock-flow consistent dynamic model where the economic system is represented by a network of trading relationships among agents. Debt contracts are one of such relationships. The model is characterized by a unique and stable steady-state, which predicts that (i) aggregate income is always limited from the above by the money supply and that (ii) debts cause a redistribution of borrowers' wealth and income in favor of lenders. In the aggregate this may also lower nominal income, as empirical evidence suggests.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 43011.
Date of creation: Nov 2012
Date of revision:
Debt; stock-flow consistency; dynamic systems;
Find related papers by JEL classification:
- D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
- E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-12-10 (All new papers)
- NEP-DGE-2012-12-10 (Dynamic General Equilibrium)
- NEP-HME-2012-12-10 (Heterodox Microeconomics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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Nobel Prize in Economics documents
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1995-5, Edinburgh School of Economics, University of Edinburgh.
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