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Confidence and financial crisis in a post-Keynesian stock flow consistent model

Author

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  • Edwin Le Heron

    (Sciences Po Bordeaux, SPIRIT, France)

Abstract

The paper aims at showing that one of the main channels by which the US 2007 financial crisis became a real and global economic crisis is the 'confidence channel', i.e. that the financial crisis affected firms, banks and households’ expectations and confidence, thus leading to what they were fearing. And I propose to model expectations and the state of confidence of private agents to use the indexes calculated by national statistical services from monthly polls.

Suggested Citation

  • Edwin Le Heron, 2011. "Confidence and financial crisis in a post-Keynesian stock flow consistent model," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 8(2), pages 361-387.
    • Handle: RePEc:elg:ejeepi:v:8:y:2011:i:2:p361-387
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    Citations

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    Cited by:

    1. LE HERON Edwin & MAROUANE Amine, 2015. "A history of contemporary post Keynesian SFC model," Cahiers du GREThA (2007-2019) 2015-15, Groupe de Recherche en Economie Théorique et Appliquée (GREThA).
    2. Nikolaidi, Maria, 2014. "Margins of safety and instability in a macrodynamic model with Minskyan insights," Structural Change and Economic Dynamics, Elsevier, vol. 31(C), pages 1-16.
    3. Steve Keen, 2013. "Predicting the ‘Global Financial Crisis’: Post-Keynesian Macroeconomics," The Economic Record, The Economic Society of Australia, vol. 89(285), pages 228-254, June.
    4. Greg Philip Hannsgen & Tai Young-Taft, 2021. "Expectational and Portfolio-Demand Shifts in a Keynesian Model of Monetary Growth Fluctuations," Working Papers PKWP2112, Post Keynesian Economics Society (PKES).
    5. Asensio, Angel & Charles, Sébastien & Lang, Dany & Le Heron, Edwin, 2011. "Les développements récents de la macroéconomie post-keynésienne," Revue de la Régulation - Capitalisme, institutions, pouvoirs, Association Recherche et Régulation, vol. 10.
    6. Sercin Sahin, 2021. "Consumer confidence, consumption, and macroeconomic fluctuations: A systemic stock‐flow consistent model," Metroeconomica, Wiley Blackwell, vol. 72(4), pages 868-904, November.
    7. Greg Hannsgen & Tai Young-Taft, 2015. "Inside Money in a Kaldor-Kalecki-Steindl Fiscal Policy Model: The Unit of Account, Inflation, Leverage, and Financial Fragility," Economics Working Paper Archive wp_839, Levy Economics Institute.
    8. Meijers, Huub & Muysken, Joan & Piccillo, Giulia, 2023. "Expectations and the stability of stock-flow consistent models," MERIT Working Papers 2023-024, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    9. Greg Philip Hannsgen, 2021. "A Minimal Probabilistic Minsky Model: 3D Continuous-Jump Dynamics," Working Papers PKWP2026, Post Keynesian Economics Society (PKES).
    10. Angel Asensio & Sébastien Charles & Edwin Le Héron & Dany Lang, 2011. "Recent developments in Post-Keynesian modeling [Los desarrollos recientes de la macroeconomía post-keynesiana]," Post-Print halshs-00664867, HAL.
    11. Özgür Bayram SOYLU, 2020. "A simple model of developing countries: financing the current account deficit Abstract: A stock flow consistent model provides a monetary and financial framework to macroeconomics. It clearly shows the sources of financing for investments and also an," Eastern Journal of European Studies, Centre for European Studies, Alexandru Ioan Cuza University, vol. 11, pages 123-145, June.
    12. Gross, Marco, 2022. "Beautiful cycles: A theory and a model implying a curious role for interest," Economic Modelling, Elsevier, vol. 106(C).
    13. Jessica Reale, 2022. "Interbank market and funding liquidity risk in a stock‐flow consistent model," Metroeconomica, Wiley Blackwell, vol. 73(3), pages 734-769, July.
    14. Greg Philip Hannsgen, 2021. "A Minimal Probabilistic Minsky Model: 3D Continuous-Jump Dynamics," Working Papers PKWP2102, Post Keynesian Economics Society (PKES).
    15. repec:spo:wpmain:info:hdl:2441/17g7senmu38qqa09nqh9tk9hbn is not listed on IDEAS
    16. Roberto Veneziani & Luca Zamparelli & Michalis Nikiforos & Gennaro Zezza, 2017. "Stock-Flow Consistent Macroeconomic Models: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 31(5), pages 1204-1239, December.
    17. Edwin Le Heron & Nicolas Yol, 2019. "The macroeconomic effects of migrants' remittances in Moldova: a stock–flow consistent model," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 16(1), pages 31-54, April.
    18. Jorge Garcia-Arias & Eduardo Fernandez-Huerga & Ana Salvador, 2013. "European Periphery Crises, International Financial Markets, and Democracy," American Journal of Economics and Sociology, Wiley Blackwell, vol. 72(4), pages 826-850, October.

    More about this item

    Keywords

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    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - 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
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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