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Financialized growth regime: lessons from Stock Flow Consistent models

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  • Reyes, Luis
  • Mazier, Jacques

Abstract

The financialized growth rate that settled in most developed economies in the nineties is characterized by the quest for higher shareholders’ profitability, increased financial accumulation at the expense of productive accumulation and the use of leverage effects. Stock Flow Consistent models à la Godley and Lavoie are well suited to analyze this growth regime. We retain two types of closures for non financial companies, either an indebtedness norm or an own funds norm. The paper studies the dynamics of these two models with the aid of simulations and supply or demand shocks, or stemming from the financial sector. Their fitness to take into account financial cycles and over indebtedness typical of financialized growth may thus be analyzed. The model with the indebtedness norm generates short-term financial cycles which appear as the regulation mode of this growth regime with an asset price serving as an adjustment variable. The model with the own funds norm generates a financial bubble with growing indebtedness and no self-stabilizing mechanism.

Suggested Citation

  • Reyes, Luis & Mazier, Jacques, 2014. "Financialized growth regime: lessons from Stock Flow Consistent models," Revue de la Régulation - Capitalisme, institutions, pouvoirs, Association Recherche et Régulation, vol. 16.
    • Handle: RePEc:rvr:journl:2014:11021
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    References listed on IDEAS

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    Cited by:

    1. Gimet, Céline & Lagoarde-Segot, Thomas & Reyes-Ortiz, Luis, 2019. "Financialization and the macroeconomy. Theory and empirical evidence," Economic Modelling, Elsevier, vol. 81(C), pages 89-110.

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    More about this item

    Keywords

    Post-Keynesian; Financial Markets and the Macroeconomy; Simulation Modeling; Postkeynesiano; mercado financiero y macroeconómico; modelode simulación; postkeynésien; marché financier et macro-économie; modèle de simulation;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques

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