U.S. growth, the housing market, and the distribution of income

Zezza, Gennaro

doi:10.2753/pke0160-3477300304

Cited by 77 publications

(70 citation statements)

References 14 publications

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“…(Godley & Lavoie 2007;Zezza 2008;Nikolaidi 2015) household behaviour is anchored by so-called stock-flow norms. Assuming that consumption depends on disposable income and some measure of wealth, households will attempt to reach a target wealth-to-income ratio (Godley and Lavoie 2007, p.75).…”

Section: Introductionmentioning

confidence: 99%

Expenditure Cascades, Low Interest Rates or Property Booms? Determinants of Household Debt in OECD Countries

Stockhammer¹,

Wildauer

2018

RBE

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The past decades have witnessed a strong increase in household debt and high growth of private consumption expenditures in many countries. This paper empirically investigates four explanations: First, the expenditure cascades hypothesis argues that an increase in inequality induced lower income groups to copy the spending behaviour of richer peer groups and thereby drove them into debt ('keeping up with the Joneses'). Second, the housing boom hypothesis argues that increasing property prices encourage household spending and household borrowing due to wealth effects, eased credit constraints and the prospect of future capital gains. Third, the low interest hypothesis argues that low interest rates encouraged households to take on more debt. Fourth, the financial deregulation hypothesis argues that deregulation of the financial sector boosted credit supply. The paper tests these hypotheses by estimating the determinants of household borrowing using a panel of 11 OECD countries (198011 OECD countries ( -2011. Results indicate that real estate prices and low interest rates were the most important drivers of household debt. In contrast the data does not support the expenditure cascades hypothesis as a general explanation of debt accumulation across OECD countries. Our results are consistent with the financial deregulation hypothesis, but its explanatory power for the 1995-2007 period is low.

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Section: Introductionmentioning

confidence: 99%

Expenditure Cascades, Low Interest Rates or Property Booms? Determinants of Household Debt in OECD Countries

Stockhammer¹,

Wildauer

2018

RBE

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“…As in Bhaduri (2011aBhaduri ( , 2011b and Bhaduri et al (2015), unrealized stock market gains lead to increased consumption by this sector. Both forms of household debt exert real-debt-burden effects (Kalecki 1944;Fisher 1933;Tobin 1980;Keen 2000;Ferri 2010;Chiarella et al 2001;Mason and Jayadev 2014;Dutt 2006Dutt , 2011Zezza 2008). These effects include higher financial fragility when the disposable income after interest payments of either class of household declines in relation to its debt.…”

Section: )mentioning

confidence: 99%

“…The latter has been introduced into Kaleckian and Keynesian growth models by Dutt (2006), Palley (2010, Zezza (2008), Isaac and Kim (2013), and others. The differential equation for c uses the normalized W-sector stock-flow identity…”

Section: Household Blockmentioning

confidence: 99%

“…Hence, the models in question were influenced by stock-flow macroeconomics, but lacked the emphasis on stock-flow norms and medium-term sustainability that characterize models such as those in Godley and Lavoie (2012). Earlier brave efforts to use Post-Keynesian ideas in an SFC model with bank money and lending include, e.g., Zezza (2008). Here, balance sheet variables influence financial fragility, consumption expenditures, and investment.…”

Section: )mentioning

confidence: 99%

“…The resulting changes in the inflation-adjusted stocks in turn affect spending decisions and financial risks in various ways. As SFC modelers and Minskyans have been at great pains to tell modelers in other schools of thought, there is no more crucial determinant of spending in the financial crisis and its aftermath than leverage (Zezza 2008). …”

Section: )mentioning

confidence: 99%

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Inside Money in a Kaldor-Kalecki-Steindl Fiscal Policy Model: The Unit of Account, Inflation, Leverage, and Financial Fragility

Hannsgen

Young-Taft

2015

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may be saved and copied for your personal and scholarly purposes.You are not to copy documents for public or commercial purposes, to exhibit the documents publicly, to make them publicly available on the internet, or to distribute or otherwise use the documents in public. licence. www.econstor.eu The idea of including a model of greenhouse gas accumulation in the model developed in this paper was inspired by the presentations at a conference at SCEPA, The New School for Social Research, New York City, which was attended by several Levy Institute scholars. This conference took place on April 25 and 26, 2014. We thank the organizers of that conference. † hannsgen@levy.org ‡ tyoungtaft@simons-rock.edu If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicatedThe Levy Economics Institute Working Paper Collection presents research in progress by Levy Institute scholars and conference participants. The purpose of the series is to disseminate ideas to and elicit comments from academics and professionals. 1 AbstractWe hope to model financial fragility and money in a way that captures much of what is crucial in Hyman Minsky's financial fragility hypothesis. This approach to modeling Minsky may be unique in the formal Minskyan literature. Namely, we adopt a model in which a psychological variable we call financial prudence (P) declines over time following a financial crash, driving a cyclical buildup of leverage in household balance sheets. High leverage or a low safe-asset ratio in turn induces high financial fragility (FF). In turn, the pathways of FF and capacity utilization (u) determine the probabilistic risk of a crash in any time interval. When they occur, these crashes entail discrete downward jumps in stock prices and financial sector assets and liabilities.To the endogenous government liabilities in Hannsgen (2014), we add common stock and bank loans and deposits. In two alternative versions of the wage-price module in the model (wagePhillips curve and chartalist, respectively), the rate of wage inflation depends on either unemployment or the wage-setting policies of the government sector. At any given time t, goods prices also depend on endogenous markup and labor productivity variables. Goods inflation affects aggregate demand through its impact on the value of assets and debts. Bank rates depend...

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Stock‐Flow Consistent Macroeconomic Models: A Survey

Nikiforos

Zezza

2018

Analytical Political Economy

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The stock-flow consistent (SFC) modeling approach, grounded in the pioneering work of Wynne Godley and James Tobin in the 1970s, has been adopted by a growing number of researchers in macroeconomics, especially after the publication of Godley and Lavoie (2007), which provided a general framework for the analysis of whole economic systems, and the recognition that macroeconomic models integrating real markets with flow-of-funds analysis had been particularly successful in predicting the Great Recession of 2007-9. We introduce the general features of the SFC approach for a closed economy, showing how the core model has been extended to address issues such as financialization and income distribution. We next discuss the implications of the approach for models of open economies and compare the methodologies adopted in developing SFC empirical models for whole countries. We review the contributions where the SFC approach is being adopted as the macroeconomic closure of microeconomic agent-based models, and how the SFC approach is at the core of new research in ecological macroeconomics. Finally, we discuss the appropriateness of the name "stock-flow consistent" for the class of models we survey.

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U.S. growth, the housing market, and the distribution of income

Cited by 77 publications

References 14 publications

Expenditure Cascades, Low Interest Rates or Property Booms? Determinants of Household Debt in OECD Countries

Expenditure Cascades, Low Interest Rates or Property Booms? Determinants of Household Debt in OECD Countries

Inside Money in a Kaldor-Kalecki-Steindl Fiscal Policy Model: The Unit of Account, Inflation, Leverage, and Financial Fragility

Stock‐Flow Consistent Macroeconomic Models: A Survey

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