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The Supermultiplier-Cum-Finance. An Application to the Credit-Led Boom before the 2008 Crash

Author

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  • Óscar Dejuán
  • Daniel Dejuán-Bitriá

Abstract

The supermultiplier model is gaining momentum. To become a cornerstone of modern macroeconomics, it should explain the dynamics of advanced market economies in a coherent, complete, and simple way. In particular, it is supposed to clarify the possibilities and limits of credit-driven economies, like the one observed in most advanced countries after 1995. This paper contributes to these goals by integrating the Sraffian supermultiplier with the post-Keynesian hypothesis of credit money endogeneity. This hypothesis is somehow modified when autonomous banks are able to accelerate credit above output growth, as happened after 2002. The gap between credit and output growth implies that a part of the loans is financing non-output transactions (land, old houses, shares), usually with a speculative bias. The consequences of a persistent gap are demand depression and asset inflation, as we observed after 2008.

Suggested Citation

  • Óscar Dejuán & Daniel Dejuán-Bitriá, 2024. "The Supermultiplier-Cum-Finance. An Application to the Credit-Led Boom before the 2008 Crash," Review of Political Economy, Taylor & Francis Journals, vol. 36(5), pages 1827-1849, November.
    • Handle: RePEc:taf:revpoe:v:36:y:2024:i:5:p:1827-1849
    DOI: 10.1080/09538259.2022.2037928
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