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Household debt and housing bubbles: a Minskian approach to boom-bust cycles

Listed author(s):
  • Soon Ryoo

    ()

    (Adelphi University)

Abstract This paper examines macroeconomic dynamics of household debt and housing prices in a two-class economy. Drawing on Minsky’s insights into financial instability and cycles, our framework combines household debt dynamics with behavioral asset price dynamics in a Keynesian macro model. We show that endogenous boom-bust cycles can emerge through the interaction between household debt and housing price dynamics. In this model, a long period of housing bubbles is characterized by increases in the profit share and the workers’ indebtedness for most of the time. The long waves are combined with a Kaldorian model of short-run business cycles.

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File URL: http://link.springer.com/10.1007/s00191-016-0473-5
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Article provided by Springer in its journal Journal of Evolutionary Economics.

Volume (Year): 26 (2016)
Issue (Month): 5 (December)
Pages: 971-1006

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Handle: RePEc:spr:joevec:v:26:y:2016:i:5:d:10.1007_s00191-016-0473-5
DOI: 10.1007/s00191-016-0473-5
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Order Information: Web: http://www.springer.com/economics/journal/191/PS2

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