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Innovation and Finance: A Stock Flow Consistent Analysis of Great Surges of Development

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  • Alessandro Caiani
  • Antoine Godin
  • Stefano Lucarelli

Abstract

The present work aims at contributing to the recent stream of literature which attempts to link the Neo-Schumpeterian/Evolutonary and the Post-Keynesian theory. The paper adopts the Post-Keynesian Stock Flow Consistent modelling approach to analyze the process of development triggered by the emergence of a new-innovative productive sector into the economic system. The model depicts a multi-sectorial economy composed of consumption and capital goods industries, a banking sector and two households sectors: capitalists and wage earners. Furthermore, it provides an explicit representation of the stock market. In line with the schumpeterian tradition, our work highlights the cyclical nature of the development process and stresses the relevance of the finance-innovation nexus, analyzing the feed-back effects between the real and financial sides of the economic system. In this way we aim at setting the basis of a comprehensive and co- herent framework to study the relationship between technological change, demand and finance along the structural change process triggered by technological innovation.

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Bibliographic Info

Paper provided by Institute for New Economic Thinking (INET) in its series INET Research Notes with number 34.

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Date of creation: Nov 2013
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Handle: RePEc:thk:rnotes:34

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