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Stock-flow Consistent Modeling through the Ages

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  • Eugenio Caverzasi
  • Antoine Godin

Abstract

The aim of the paper is to provide an overview of the current stock-flow consistent (SFC) literature. Indeed, we feel the SFC approach has recently led to a blossoming literature, requiring a new summary after the work of Dos Santos (2006) and, above all, after the publication of the main reference work on the methodology, Godley and Lavoie's Stock-flow Consistent Approach (2007). The paper is developed along the following lines. First, a brief historical analysis investigates the roots of this class of models that can be traced as far back as 1949 and the work of Copeland. Second, the competing points of view regarding some of its main controversial aspects are underlined and used to classify the different methodological approaches followed in using these models. Namely, we discuss (1) how the models are solved, (2) the treatment of time and its implication, and (3) the need-or not-of microfoundations. These results are then used in the third section of the paper to develop a bifocal perspective, which allows us to divide the literature reviewed according to both its subject and the methodology. We explore various topics such as financialization, exchange rate modeling, policy implication, the need for a common framework within the post-Keynesian literature, and the empirical use of SFC models. Finally, the conclusions present some hypotheses (and wishes) over the possible lines of development of the stock-flow consistent models.

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Bibliographic Info

Paper provided by Levy Economics Institute in its series Economics Working Paper Archive with number wp_745.

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Date of creation: Jan 2013
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Handle: RePEc:lev:wrkpap:wp_745

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Keywords: Stock-flow Consistent; Post-Keynesian; Literature Review;

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Citations

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Cited by:
  1. Bruno Bonizzi, 2013. "Capital Flows to Emerging Markets: An alternative Theoretical Framework," Working Papers, Department of Economics, SOAS, University of London, UK 186, Department of Economics, SOAS, University of London, UK.
  2. John C. Boik, 2014. "First Microsimulation Model of a LEDDA Community Currency--Dollar Economy," Working Paper, Principled Societies Project 0001, Principled Societies Project, revised Aug 2014.
  3. Lengnick, Matthias & Krug, Sebastian & Wohltmann, Hans-Werner, 2013. "Money creation and financial instability: An agent-based credit network approach," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 7(32), pages 1-44.
  4. Giovanni Bernardo & Emanuele Campiglio, 2013. "A Simple Model of Income, Aggregate Demand, and the Process of Credit Creation by Private Banks," Economics Working Paper Archive, Levy Economics Institute wp_777, Levy Economics Institute.
  5. Eugenio Caverzasi, 2013. "The Missing Macro Link," Economics Working Paper Archive, Levy Economics Institute wp_753, Levy Economics Institute.
  6. Eugenio Caverzasi, 2012. "From the Financial Instability Hypothesis to the theory of Capital Market Inflation: a structural interpretation of the sub-prime crisis," DEM Working Papers Series 018, University of Pavia, Department of Economics and Management.
  7. Alessandro Caiani & Antoine Godin & Stefano Lucarelli, 2013. "Innovation and Finance: A Stock Flow Consistent Analysis of Great Surges of Development," INET Research Notes 34, Institute for New Economic Thinking (INET).

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