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Words to the Wise: Stock Flow Consistent Modeling of Financial Instability

Author

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  • Stephen Kinsella

    (Department of Economics, University of Limerick)

Abstract

The crisis has exposed the failure of economic models to deal sensibly with endogenously generated crises propagating from the financial sectors to the real economy, and back again. The goal of this paper is to review the method of stock flow consistent modeling to highlight areas in which it is deficient. I argue there is a fruitful research agenda in shoring up these deficiencies. The objective of stock flow modeling should be the ability to practically model unstable macroeconomies, and in particular their interactions with the financial sector. These models should provide 'Words to the Wise', and until they do, they are just thought experiments.

Suggested Citation

  • Stephen Kinsella, 2011. "Words to the Wise: Stock Flow Consistent Modeling of Financial Instability," Working Papers 201130, Geary Institute, University College Dublin.
    • Handle: RePEc:ucd:wpaper:201130
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    File URL: http://www.ucd.ie/geary/static/publications/workingpapers/gearywp201130.pdf
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    References listed on IDEAS

    as
    1. Barwell, Richard & Burrows, Oliver, 2011. "Financial Stability Paper No 10: Growing Fragilities? Balance Sheets in the Great Moderation," Bank of England Financial Stability Papers 10, Bank of England.
    2. Amendola, Mario & Gaffard, Jean-Luc, 1998. "Out of Equilibrium," OUP Catalogue, Oxford University Press, number 9780198293804.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Instability; finance; stock flow consistent models;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation

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