A simple theory of exploding household debts

Kim, Minseong (2016): A simple theory of exploding household debts.

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: household debt, budget constraint
• Subjects: D - Microeconomics > D1 - Household Behavior and Family Economics > D11 - Consumer Economics: Theory; E - Macroeconomics and Monetary Economics > E1 - General Aggregative Models > E13 - Neoclassical; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E21 - Consumption ; Saving ; Wealth; E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E62 - Fiscal Policy; H - Public Economics > H6 - National Budget, Deficit, and Debt > H61 - Budget ; Budget Systems; H - Public Economics > H6 - National Budget, Deficit, and Debt > H62 - Deficit ; Surplus; H - Public Economics > H6 - National Budget, Deficit, and Debt > H63 - Debt ; Debt Management ; Sovereign Debt

References

Notes on Macroeconomic Theory. Thomas Sargent. Federal Reserve Bank of Minneapolis Working Paper Series 41 No. 75-76.