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Housing Market, Household Debt, Financial Accelerator, and Stagnation in a Stock-Flow Consistent Model
FRANCESCO RUGGERI
In the paper, we try to represent what happened to the U.S. economy before the financial crisis of 2007. We describe the different dynamics in place during the Great Moderation period that have led to an increase in the financial fragility of the household sector and to recession and stagnation in the aftermath of the financial crisis. We use a stock-flow consistent model to describe how in an environment characterized by income inequality the interaction between the banking sector, the housing market, and the household sectors can produce a cycle driven by the ability of the households to finance their expenditure using the value of their house as a collateral. The model can reproduce some of the dynamics that have led to the recession.
Volume :- No.17 (2023)
Issue No :- 1 (2023)
Pages :- 111-143