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Stock-flow ratios and the paradox of debt in canonical neo-kaleckian and supermultiplier models

Brochier, Lidia and Freitas, Fábio (2019): Stock-flow ratios and the paradox of debt in canonical neo-kaleckian and supermultiplier models.

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Abstract

The paper addresses the features of stock-flow consistent (SFC) canonical versions of neo-kaleckian and supermultiplier models that introduce the accumulation of debt of households and firms. The aim of this comparison is twofold: (i) to analyze under which conditions the paradox of debt emerges in the household and firms sector in each model; (ii) to evaluate the extent in which these conditions differ due to each models' specific closure. Preliminary results suggest that the paradox of debt in firms' sector is not a necessary result of supermultiplier models. As for households sector, the paradox of debt is a feature of the canonical supermultiplier model, yet there may be episodes of rising debt-to-income ratios and financial crisis as precipitated by policy decisions.

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