Who, in the U.S., is ultimately responsible for servicing government debt levels? They are the individual households, directly and indirectly through the ownership of companies. The number of households increased from 116.01 million as per the end of 2007 to 129.93 million per the end of 2021....

The classical IS-LM model does not have inflation and inflation expectation in it; it is exogenous. The LM curve shifts as the price level changes and subsequently the real money supply changes assuming the money stock stays the same. The decreasing interest rate pressure on the private sector...

This paper examines the macroeconomic consequences of a demographic transition in an environment where a producer's capital structure is relevant, thereby introducing an asset supply channel. Producers are heterogeneous with respect to how productive they are in different states of the world and...

The Bank of England started with Quantitative Easing in 2009 and bought U.K. Gilts for £445 billion. The Bank subsequently bought a further £450 billion. The Bank recently increased its key interest rate to 3%. The pressure on household's budgets is immense. This paper proposes a different...

In the U.K.,like in other countries, households have usually two main savings objectives: Buying a home and saving for a pension. Both are long term commitments. When the Bank of England increases its base rates, households are often forced to limit ordinary expenses in order to give priority to...

This paper provides pioneering estimates of the impact of loan-to-value (LTV) ratios, also known as leverage, on economic growth in Bolivia. The analysis reveals the pro-cyclicality between the economic and financial cycles, confirming the stylized facts. We emphasize the significance of...

We argue that positive comovements between land prices and business investment are a driving force behind the broad impact of land-price dynamics on the macroeconomy. We develop an economic mechanism that captures the comovements by incorporating two key features into a DSGE model: we introduce...

This paper studies the long-run relationship between consumption, asset wealth and income - the consumption-wealth ratio - in Germany, based on data from 1980 to 2003. Earlier papers for the Anglo-Saxon economies have documented that departures of these three variables from their common trend...

We study the role of institutional characteristics of mortgage markets in affecting the strength and timing of the effects of monetary policy shocks on house prices and consumption in a sample of OECD countries. We document three facts: (1) there is significant divergence in the structure of...

Abstract Debt, equity and income: limits to the freedom of choice in an economy. Three concepts have been introduced in this paper, which help explain the economic developments in the U.S. and the U.K. over the last sixteen years; they are the “income gap”, the “equity gap” and the...