The recent literature has shown that income inequality is one of the main causes of borrowing and debt accumulation by working households. This paper explores the possibility that household indebtedness is an important cause of rising income inequality. If workers experience rising debt burdens,...

The outbreak of the financial crisis in 2008 witnessed a marked contraction in US consumption spending that had hitherto been boosted by historically high levels of household debt-financing. These events question the validity of conventional models of consumption based on the life-cycle...

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We develop a Keynesian model of aggregate consumption. Our theory emphasizes the importance of the relative income hypothesis and debt-finance for understanding household consumption behavior. It is shown that particular importance attaches to how net debtor households service their debts, and...

We study the transmission of monetary policy in the presence of heterogeneous households and examine the implications when the share of constrained households is a function of monetary policy. We build an analytically tractable heterogeneous agent New Keynesian model (THANK) with an endogenous...

We estimate that the supply of sovereign safe assets is a major driver of neutral interest rates--real rates consistent with both economic activity and inflation at their trends. We find this result using an empirical cross-country model with many economic drivers for the neutral rates of 11...

Samuelson's biological theory of interest rate - that population growth rate and interest rate must be the same - affects many countries, especially in shaping their population and retirement policies. This paper proves that he derives his so-called theorem by many tricks, which are, however, in...

The ability of term spread to forecast U.S. output growth could be improved by two ways: (i) Combining with the Harrod-Domar variable - net saving as a percentage of gross national income - that used to proxy for aggregate supply; and (ii) Using a system of simultaneous equations, in which U.S....

Zimbabwe is one nation that has for many years remained on the top list of economies with high interest rates spread. High interest rates are a signal of financial sector inefficiency. The stability of the financial sector is greatly linked to economic growth and economic stability. The study...