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A nonbehavioral theory of saving

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  • Michalis Nikiforos

Abstract

The article presents a demand-driven model, where the saving rate of households at the bottom of the income distribution becomes the endogenous variable that adjusts for full employment to be maintained over time. An increase in income inequality and the current account deficit and a consolidation of the government budget lead to a decrease in the saving rate of the household sector. Such a process is unsustainable because it leads to an increase in the debt-to-income ratio of the households and its maintenance depends on some kind of asset bubble. This framework allows us to better understand the factors that led to the Great Recession in the United States and the dilemma of the present and the future regarding a repeat of this unsustainable process or secular stagnation.

Suggested Citation

  • Michalis Nikiforos, 2016. "A nonbehavioral theory of saving," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 39(4), pages 562-592, October.
    • Handle: RePEc:mes:postke:v:39:y:2016:i:4:p:562-592
    DOI: 10.1080/01603477.2016.1245584
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    References listed on IDEAS

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    1. Raghuram G. Rajan, 2010. "Fault Lines: How Hidden Fractures Still Threaten the World Economy," Economics Books, Princeton University Press, edition 1, number 9111.
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    Cited by:

    1. Roberto Veneziani & Luca Zamparelli & Michalis Nikiforos & Gennaro Zezza, 2017. "Stock-Flow Consistent Macroeconomic Models: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 31(5), pages 1204-1239, December.
    2. Michalis Nikiforos, 2020. "Demand, Distribution, Productivity, Structural Change, and (Secular?) Stagnation," Economics Working Paper Archive wp_945, Levy Economics Institute.
    3. Michalis Nikiforos, 2023. "Notes on the accumulation and utilization of capital: Some theoretical issues," Metroeconomica, Wiley Blackwell, vol. 74(1), pages 223-247, February.
    4. Michalis Nikiforos, 2019. "Induced Shifting Involvements and Cycles of Growth and Distribution," Economics Working Paper Archive wp_924, Levy Economics Institute.
    5. Francesco Ruggeri, 2021. "Household debt, aggregate demand, and instability in a Stock-Flow model," Working Papers 4/21, Sapienza University of Rome, DISS.
    6. Carrillo-Maldonado, Paul & Nikiforos, Michalis, 2024. "Estimating a Time-Varying Distribution-Led Regime," Structural Change and Economic Dynamics, Elsevier, vol. 68(C), pages 163-176.

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