ABSTRACT
This chapter presents a Post-Keynesian (PK) approach to examine how different degrees of the financialization of households in the decade prior to the Great Financial Crisis fostered the development of distinct demand regimes. It analyzes the interdependence and sustainability of these demand regimes. The chapter introduces the PK concept of demand regimes. It examines how different forms of financialization gave rise to different demand regimes in advanced economies. The concept of effective demand is the unifying theme for PK economics. In a situation of involuntary unemployment the level of effective demand will determine the level of output. While the possibility of an export-driven demand regime is economically straightforward, its link to financialization may not be obvious. PKs have argued that financial liberalization facilitates the development of an export-driven demand regime for competitive economies, as it eases the access of deficit countries to foreign credit.
