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Fiscal and Monetary Policy in an SFC Model of the Italian Economy

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  • Francesco Zezza

Abstract

Following the Great Financial Crisis of 2008-9, there has been a shift in mainstream economic policy modeling toward "realism," with dynamic stochastic general equilibrium (DSGE) models partly diverging from the representative agent framework, and large-scale, New-Keynesian structural models addressing real-financial interactions in greater detail. Still, the need for tractability of the former, and the lack of theoretical structure of the latter prevented the complete introduction of a modern--and complex--multi-sector/multi-asset financial system in policy models in use at central banks and treasuries. However, empirical models adopting the Stock-Flow Consistent (SFC) approach resolved most of these complications with a surge in the number of country models over the last few years. The present work lays out the main out-of-sample features of a quarterly SFC model of the Italian economy (MITA).

Suggested Citation

  • Francesco Zezza, 2024. "Fiscal and Monetary Policy in an SFC Model of the Italian Economy," Economics Working Paper Archive wp_1063, Levy Economics Institute.
    • Handle: RePEc:lev:wrkpap:wp_1063
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • C54 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Quantitative Policy Modeling
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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