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Long Term Effects of Fiscal and Monetary Policy in a Stock-Flow-Consistent Macro-Framework


  • Ulrich van Suntum

    () (Westfälische Wilhelms-Universität Münster, Centrum für angewandte Wirtschaftsforschung, Am Stadtgraben 9, 48143 Münster)


Some fundamental issues of fiscal and monetary policy are discussed within a stock-flow-consistent macroeconomic framework for an open economy. The core of the model is the financial sector with both a capital market and a money market and correspondingly differing interest rates. Further key elements are households which maximize an inter-temporal utility function with respect to both consumption and wealth, profit maximizing firms subject to a production function with decreasing returns to scale, and government expenses funded by both taxes and public debt. Concerning monetary policy, different regimes are discussed, including monetary abstinence, quantitative easing, and monetizing public debt. Typical Keynesian policy measures such as rising wages, expansionary monetary policy, and public deficit spending are also discussed. The main focus is on long term effects of these measures, with the dynamics being only briefly sketched. Because the model is entirely solvable analytically, it may also be useful as a means of didactics.

Suggested Citation

  • Ulrich van Suntum, 2013. "Long Term Effects of Fiscal and Monetary Policy in a Stock-Flow-Consistent Macro-Framework," Credit and Capital Markets, Credit and Capital Markets, vol. 46(2), pages 181-212.
  • Handle: RePEc:kuk:journl:v:2:y:2013:i:2:p:181-212

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    More about this item


    public debt; stock flow consistent model; monetary policy;

    JEL classification:

    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General


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