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Income Redistribution, Consumer Credit, and Keeping Up with the Riches

Klein, Mathias; Krause, Christopher

In this study, we set up a dynamic stochastic general equilibrium (DSGE) model with upward looking consumption comparison and show that consumption externalities are an important driver of consumer credit dynamics. 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 condition their consumption choice on the investors' level of consumption. We estimate the model and find a significant keeping up mechanism by matching business cycle statistics. In reproducing credit moments, our proposed model significantly outperforms a model version in which we abstract from consumption externalities.

Verlagsausgabe §
DOI: 10.5445/IR/1000125531
Veröffentlicht am 30.10.2020
Cover der Publikation
Zugehörige Institution(en) am KIT Institut für Volkswirtschaftslehre (ECON)
Publikationstyp Zeitschriftenaufsatz
Publikationsmonat/-jahr 12.2020
Sprache Englisch
Identifikator ISSN: 0022-2879, 1538-4616
KITopen-ID: 1000125531
Erschienen in Journal of money, credit and banking
Verlag John Wiley and Sons
Band 52
Heft 8
Seiten 1937-1971
Vorab online veröffentlicht am 29.09.2020
Schlagwörter income redistribution, consumer credit, relative consumption motive, business cycles
Nachgewiesen in Web of Science
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