In our model, when households borrow against high forecast home values, the marginal propensity to save
can become negative.
The marginal propensity to save
(MIS) is found to be higher in the case of urban household.
To arrive at actual numbers for w in equation (3), it is necessary to consider what may be reasonable numbers for the Keynesian marginal propensity to save
, s, and the marginal deadweight loss ratio, r.
Let [gamma] = [partial]I/[partial]y > 0 be the marginal propensity to invest, [theta] = [partial]NX/[partial]y < 0 be the marginal negative trade balance effect (due to the marginal propensity to import), and [alpha] = [partial]S/[partial]y > 0 be the marginal propensity to save
Another controversy is about the level of the Marginal Propensity to Consume (MPC) and, therefore, the Marginal Propensity to Save
Even though foreign capital has not been productive, the marginal propensity to save
seems sufficient to permit SSA to generate a surplus for debt service.