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A simple theory of exploding household debts

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  • Kim, Minseong

Abstract

In this paper, I explore how a household budget constraint allows one to construct a simple theory of exploding household debts. The conclusion reached in this paper is that in case the household started off being indebted, maintaining balanced budget all the time is a very dangerous choice. For analysis, government is assumed to be non-existent.

Suggested Citation

  • Kim, Minseong, 2016. "A simple theory of exploding household debts," MPRA Paper 70849, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:70849
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    File URL: https://mpra.ub.uni-muenchen.de/70849/1/MPRA_paper_70849.pdf
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    More about this item

    Keywords

    household debt; budget constraint;

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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