Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/105947
Authors: 
Charpe, Matthieu
Flaschel, Peter
Year of Publication: 
2011
Series/Report no.: 
IMK Working Paper 5/2011
Abstract: 
This paper presents a model addressing the conditions under which financial instability arises in the event of household debt. The model addresses two main cases. First, household debt is affected by functional income distribution. Second, household debt is affected by credit supply and depends on bank performances. The model shows that financial fragility arises through a Fisher effect in the first case and through a debt financed consumption boom in the second case. The model then explores two extensions. First, we raise the question of debt default and its impact on financial instability. Second, we discuss the ability of capital adequacy ratio to limit financial instability.
Subjects: 
Flexicurity
employer of ¯rst resort
Solovian growth
company pension funds
sustainability
JEL: 
E3
E6
H1
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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