Household debt: The missing link between inequality and secular stagnation

How do inequality and growth evolve in the long run and why? We address this question by analyzing the interplay between household debt, growth and inequality within a monetary, stock-flow consistent framework. We first consider a Goodwin–Keen model where household consumption, rather than investment by firms, is the key behavioural driver for the dynamics of the economy. Whenever consumption exceeds current income, households can borrow from …