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A dynamic model of financial balances for the United Kingdom

Author

Listed:
  • Burgess, Stephen

    () (Bank of England)

  • Burrows, Oliver

    () (Bank of England)

  • Godin, Antoine

    () (Kingston University)

  • Kinsella, Stephen

    () (University of Limerick)

  • Millard, Stephen

    () (Bank of England)

Abstract

We construct a new scenario analysis model for the United Kingdom using ONS data from 1987 to the present. The model links decisions about real variables to credit creation in the financial sector and decisions about asset allocation among investors for a wide array of financial assets. We develop, estimate, and calibrate the model from first principles as well as describing the stock-flow coherent database we construct to validate the model. We impose several scenarios on the model to test its usefulness as a medium term scenario analysis tool, including increases in banks’ capital ratios, sudden stops, changes in investment, increases in house prices and fiscal expansions.

Suggested Citation

  • Burgess, Stephen & Burrows, Oliver & Godin, Antoine & Kinsella, Stephen & Millard, Stephen, 2016. "A dynamic model of financial balances for the United Kingdom," Bank of England working papers 614, Bank of England.
  • Handle: RePEc:boe:boeewp:0614
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    File URL: https://www.bankofengland.co.uk/-/media/boe/files/working-paper/2016/a-dynamic-model-of-financial-balances-for-the-uk.pdf?la=en&hash=AD1CDF5774C1AA91B7B91A2FE1FA704E95B79A77
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    References listed on IDEAS

    as
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    4. 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.
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    Cited by:

    1. Michalis Nikiforos & Gennaro Zezza, 2017. "Stock-flow Consistent Macroeconomic Models: A Survey," Economics Working Paper Archive wp_891, Levy Economics Institute.
    2. Jacob Assa, 2017. "Leveraged Growth: Endogenous Money and Speculative Credit in a Stock-flow Consistent Measure of Output," Working Papers 1727, New School for Social Research, Department of Economics.
    3. Muysken, Joan & Bonekamp, Bas & Meijers, Huub, 2017. "Stock-flow consistent data for the Dutch economy, 1995-2015," MERIT Working Papers 045, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).

    More about this item

    Keywords

    Sectoral balances; flow of funds; macroeconomic modelling;

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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