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A stock-flow-fund ecological macroeconomic model

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  • Dafermos, Yannis
  • Nikolaidi, Maria
  • Galanis, Giorgos

Abstract

This paper develops a stock-flow-fund ecological macroeconomic model that combines the stock-flow consistent approach of Godley and Lavoie with the flow-fund model of Georgescu-Roegen. The model has the following key features. First, monetary and physical stocks and flows are explicitly formalised taking into account the accounting principles and the laws of thermodynamics. Second, Georgescu-Roegen’s distinction between stock-flow and fund-service resources is adopted. Third, output is demand-determined but supply constraints might arise either due to environmental damages or due to the exhaustion of natural resources. Fourth, climate change influences directly the components of aggregate demand. Fifth, finance affects macroeconomic activity and the materialisation of investment plans that determine ecological efficiency. The model is calibrated using global data. Simulations are conducted to investigate the trajectories of key environmental, macroeconomic and financial variables under (i) different assumptions about the sensitivity of economic activity to the leverage ratio of firms and (ii) different types of green finance policies.

Suggested Citation

  • Dafermos, Yannis & Nikolaidi, Maria & Galanis, Giorgos, 2015. "A stock-flow-fund ecological macroeconomic model," Greenwich Papers in Political Economy 14063, University of Greenwich, Greenwich Political Economy Research Centre.
  • Handle: RePEc:gpe:wpaper:14063
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    More about this item

    Keywords

    ecological macroeconomics; stock-flow consistent modelling; laws of thermodynamics; climate change; finance;
    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
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q57 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Ecological Economics

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