Marginal propensity to consume

This article suggests an approach to teaching Keynesian ideas in the History of Economic Thought course. Summarized are key concepts of Keynes’ General Theory, as well as major Keynesian contributions to the development of economic ideas in the mid-20th century. After a short biographical note characteristics of the Keynesian economic method are outlined together with basic concepts and insights for economic policy, ensuing from the theoretical analysis.

*Статията се издава с покрепата на проект "Развитие на аналитичен подход за изследване на потенциала на комплексна методология, обединяваща инструментариума на поведенческата икономика (англ. behavioral economics) и икономиката на щастието (англ. happiness economics) с цел усъвършенстване на теоретичните постулати в т.нар. публични поведенчески финанси (№ 120, ФНИ на СУ "Климент Охридски").

The paper argues that the economic imbalances that caused the present crisis should be thought of as the outcome of the interaction of the effects of financial deregulation with the macroeconomic effects of rising inequality. In this sense rising inequality should be regarded as a root cause of the present crisis. We identify four channels by which it has contributed to the crisis. First, rising inequality creates a downward pressure on aggregate demand since it is poorer income groups that have high marginal propensities to consume. Second, international financial deregulation has allowed countries to run larger current account deficits and for longer time periods. Thus, in reaction to potentially stagnant demand two growth models have emerged: a debt‐led model and an export‐ led model. Third, (in the debt‐led growth models) higher inequality has led to higher household debt as working class families have tried to keep up with social consumption norms despite stagnating or falling ...

This thesis addresses a long-standing puzzle in empirical econometrics: Does the size distribution of income matter in the aggregate consumption function? Current opinion on whether distribution matters is divided. There is also a lack of consensus (among those who believe ...

The paper examines the linkages between housing markets and the business cycle in OECD countries, focusing on how differences in the degree of resilience to economic shocks can be affected by the structural characteristics of housing and mortgage markets. The paper ...

This paper investigates household indebtedness and housing wealth effects on consumption. To identify exogenous movements of housing wealth and leverage, we estimate housing supply elasticities for New Zealand urban centers. We construct synthetic panel series by using household survey data to estimate the marginal propensity to consume out of exogenous changes in housing wealth, while controlling for the household leverage ratio. Our empirical results show that, on average, the marginal propensity to consume out of housing wealth is about 3 cents out of one dollar, but it is larger in responding to negative shocks than positive changes in housing wealth. We further investigate the role of household indebtedness in accounting for the asymmetric effect. Our findings suggest that household leverage reinforces the housing wealth effect in a housing bust, but dampens the housing wealth effect in a boom.

The financial crisis, which has intensified since fall 2008, has led to deteriorated funding conditions, a decline in the confidence of economic players and a dramatic slump in world trade, thereby unleashing a global recession. Governments worldwide launched measures to stabilize the financial systems and stimulate economic activity, which helped prevent a further escalation of the financial crisis. Since economic stimulus measures require some time to take full effect, a deep recession must be anticipated for 2009. In the U.S.A., an end to the recession is not in sight, despite comprehensive measures taken to support the economy. The Federal Reserve System (Fed) cut key interest rates to their lowest level historically and is now pursuing unconventional policies in a bid to revive lending. In the euro area, recession also deepened in the fourth quarter of 2008, especially due to weakening export demand and investment; unemployment rose substantially. According to leading indicator...