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Household Debt, Dynamic Stability, and Change in Demand Creation Patterns

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  • Hiroshi Nishi

Abstract

This paper examines dynamic stability and demand creation patterns of an economy in the context of the augmentation of household debt. First, we investigate the dynamic characteristics specific to an economy with household borrowing. Second, we reveal how demand creation and economic growth pattern change with the introduction of households' active borrowing. Our results shows that it is more favorable for the stability of an economy to politically control the interest rate on lending rather than to leave it to be determined by private financial institutions. Our results also indicate that even if the demand regime is wage-led, paradoxically, a rise in wage share may not necessarily stimulate economic growth. On the other hand, profit-led growth is more likely.

Suggested Citation

  • Hiroshi Nishi, 2012. "Household Debt, Dynamic Stability, and Change in Demand Creation Patterns," Review of Political Economy, Taylor & Francis Journals, vol. 24(4), pages 607-622, October.
  • Handle: RePEc:taf:revpoe:v:24:y:2012:i:4:p:607-622
    DOI: 10.1080/09538259.2012.729933
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    File URL: http://hdl.handle.net/10.1080/09538259.2012.729933
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    Cited by:

    1. Yun K. Kim & Alan G. Isaac, 2017. "Firms’ Retention Behavior, Debt, and Macroeconomic Dynamics," Working Papers 2017_04, University of Massachusetts Boston, Economics Department.
    2. Engelbert Stockhammer, 2015. "Wage-led versus profit-led demand: What have we learned? A Kalecki-Minsky view," Working Papers PKWP1512, Post Keynesian Economics Study Group (PKSG).
    3. Yun K. Kim, 2016. "Macroeconomic effects of household debt: an empirical analysis," Review of Keynesian Economics, Edward Elgar Publishing, vol. 4(2), pages 127-150, April.

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