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Household Debt and Housing Bubble: A Minskian Approach to Boom-Bust Cycles

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Abstract
This paper examines macroeconomic dynamics of household debt and housing prices. Drawing on Minsky's insights into financial instability and cycles, our framework combines household debt dynamics with behavioral asset price dynamics in a Keynesian macro model. We show that endogenous boom-bust cycles can emerge through the interaction between household debt and housing price dynamics. The resulting long waves are combined with a Kaldorian model of short-run business cycles.
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Working Paper
Date
2015
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