Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/103321
Authors: 
Klein, Mathias
Krause, Christopher
Year of Publication: 
2014
Series/Report no.: 
Ruhr Economic Papers 509
Abstract: 
In this study, the relation between consumer credit and real economic activity during the Great Moderation is studied in a dynamic stochastic general equilibrium model. Our model economy is populated by two different household types. Investors, who hold the economy's capital stock, own the firms and supply credit, and workers, who supply labor and demand credit to finance consumption. Furthermore, workers seek to minimize the difference between investors' and their own consumption level. Qualitatively, an income redistribution from labor to capital leads to consumer credit dynamics that are in line with the data. As a validation exercise, we simulate a three-shock version of the model and find that our theoretical set-up is able to reproduce important business cycle correlations.
Subjects: 
income redistribution
consumer credit
relative consumption motive
business cycles
JEL: 
E21
E32
E44
Persistent Identifier of the first edition: 
ISBN: 
978-3-86788-584-6
Document Type: 
Working Paper

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