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The Simple Analytics of Debt-driven Business Cycles

In: Financialization

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  • Thomas I. Palley

    (AFL-CIO)

Abstract

Chapter 3 presented a static stages of development model of financial-ization. A key feature was increasing debt and debt burdens in both the household and corporate sector. This chapter explores how debt can give rise to boom–bust business cycles.

Suggested Citation

  • Thomas I. Palley, 2013. "The Simple Analytics of Debt-driven Business Cycles," Palgrave Macmillan Books, in: Financialization, chapter 4, pages 62-81, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-137-26582-1_4
    DOI: 10.1057/9781137265821_4
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    References listed on IDEAS

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    1. Bernanke, Ben & Gertler, Mark & Gilchrist, Simon, 1996. "The Financial Accelerator and the Flight to Quality," The Review of Economics and Statistics, MIT Press, vol. 78(1), pages 1-15, February.
    2. Bernanke, Ben S. & Gertler, Mark & Gilchrist, Simon, 1999. "The financial accelerator in a quantitative business cycle framework," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 21, pages 1341-1393, Elsevier.
    3. Marc Jarsulic, 1989. "Endogenous Credit and Endogenous Business Cycles," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 12(1), pages 35-48, September.
    4. Peter Skott, 2012. "Theoretical And Empirical Shortcomings Of The Kaleckian Investment Function," Metroeconomica, Wiley Blackwell, vol. 63(1), pages 109-138, February.
    5. Palley, Thomas I, 1997. "Expected Aggregate Demand, the Production Period and the Keynesian Theory of Aggregate Supply," The Manchester School of Economic & Social Studies, University of Manchester, vol. 65(3), pages 295-309, June.
    6. Palley, Thomas I, 1996. "Inside Debt, Aggregate Demand, and the Cambridge Theory of Distribution," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 20(4), pages 465-474, July.
    7. Amitava Krishna Dutt, 2006. "Maturity, Stagnation And Consumer Debt: A Steindlian Approach," Metroeconomica, Wiley Blackwell, vol. 57(3), pages 339-364, July.
    8. Amitava K. Dutt (ed.), 1994. "New Directions In Analytical Political Economy," Books, Edward Elgar Publishing, number 157.
    9. Palley, Thomas I., 1999. "General disequilibrium analysis with inside debt," Journal of Macroeconomics, Elsevier, vol. 21(4), pages 785-803.
    10. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
    11. Caskey, John & Fazzari, Steven M, 1987. "Aggregate Demand Contractions with Nominal Debt Commitments: Is Wage Flexibility Stabilizing?," Economic Inquiry, Western Economic Association International, vol. 25(4), pages 583-597, October.
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    More about this item

    Keywords

    Business Cycle; Asset Price; Aggregate Demand; Debt Service; Investment Spending;
    All these keywords.

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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