Home > Uncategorized > Graph of the day. Borrowing by households and non-financial companies, Eurozone

Graph of the day. Borrowing by households and non-financial companies, Eurozone

The discussion about the size of the multiplier has flared up, again. This is all about the next question: will private parties (households, non-financial companies, pension funds etcetera) increase or decrease spending when the government cuts expenditure? When they increase expenditure (out of a smaller income!), this will at least partly offset decreased government expenditure (or, mutatis mutandis, increases in taxes). If households etcetera increase spending, the money has to come from somewhere – either they have to use their savings to finance it or they have to borrow it (remember: borrowing can increase the total amount of money). What do Eurozone households and non-financial companies actually do, at this moment? In austerity countries they are clearly paying down debt – i.e. aggravating the decline is aggregate spending caused by lower government spending. Which is, technically, an argument for a high multiplier. And against the fallacy of Ricardian equivalence.

Multipele eurosclerose

Source.

About these ads
Categories: Uncategorized
  1. Mysjkin
    January 6, 2013 at 5:25 pm | #1

    The numbers for the Netherlands are quite surprising!

  2. scot
    January 7, 2013 at 3:26 pm | #2

    Why aren’t all the Euro countries shown?

    • merijnknibbe
      January 7, 2013 at 4:02 pm | #3

      I leave out all countries with less than 1 million inhabitants, i.e. Cyprus, Malta and Luxembourg.

  1. No trackbacks yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Follow

Get every new post delivered to your Inbox.

Join 9,505 other followers