Desiderio, Saul and Chen, Siyan (2012): Long-run consequences of debt in a stock-flow consistent network economy.
Download (236kB) | Preview
In 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.
|Item Type:||MPRA Paper|
|Original Title:||Long-run consequences of debt in a stock-flow consistent network economy|
|Keywords:||Debt; stock-flow consistency; dynamic systems|
|Subjects:||D - Microeconomics > D3 - Distribution > D31 - Personal Income, Wealth, and Their Distributions
E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E51 - Money Supply; Credit; Money Multipliers
C - Mathematical and Quantitative Methods > C6 - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling > C61 - Optimization Techniques; Programming Models; Dynamic Analysis
|Depositing User:||Saul Desiderio|
|Date Deposited:||04. Dec 2012 17:16|
|Last Modified:||20. Feb 2013 08:19|
 Bernanke, B. and Gertler M. 1989. Agency Costs, Net Worth, and Business Fluctuation, American Economic Review, 79 (1), 14-31.
 Cecchetti, S. G., Mohanty, M. S. and Zampolli F. 2011. The Real Eects of Debt, BIS Working Papers, 381.
 Checherita, C. and Rother P. 2010. The Impact of High and Growing Government Debt on Economic Growth. An Empirical Investigation for the Euro Area, European Central Bank Working Papers, no. 1237, August.
 Clements, B., Bhattacharya, R. and Nguyen T. Q. 2003. External Debt, Public Investment, and Growth in Low-Income Countries, IMF Working Paper, 03/249.
 Fisher, I. 1933. The Debt-Deflation Theory of Great Depressions, Econometrica, 1, 337-57.
 Godley, W. 1999. Money and Credit in a Keynesian Model of Income Determination, Cambridge Journal of Economics, 23, 393-411.
 Godley, W. and Lavoie M. 2007. Monetary Economics - an Integrated Approach to Credit, Money, Income, Production and Wealth, Palgrave Macmillan.
 Greenwald, B. and Stiglitz J. 1993. Financial Markets Imperfections and Business Cycles, Quarterly Journal of Economics, 108, 77-114.
 Kiyotaki, N. and Moore J. 1997. Credit Cycles, Journal of Political Economy, 105 (2), 211-248.
 Minsky, H. 1982. Can "it" Happen Again? Essays on Instability and Finance, M.E. Sharpe, Armonk, NY.
 Patterson, K.D. and Stephenson, M.J. 1988. Stock-Flow Consistent Accounting: a Macroeconomic Perspective, The Economic Journal, 98 p.787.
 Pattillo, C., Poirson, H. and Ricci L. 2002. External Debt and Growth, IMF Working Paper 02/69.
 Tobin, J. 1969. A General Equilibrium Approach to Monetary Theory, Journal of Money, Credit, and Banking, 1, 15-29.
 Tobin, J. 1982. Money and Finance in the Macroeconomic Process, Journal of Money, Credit, and Banking, 14, 171-204.