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Stock-flow Consistent Modeling through the Ages

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  • Eugenio Caverzasi
  • Antoine Godin

Abstract

The aim of the paper is to provide an overview of the current stock-flow consistent (SFC) literature. Indeed, we feel the SFC approach has recently led to a blossoming literature, requiring a new summary after the work of Dos Santos (2006) and, above all, after the publication of the main reference work on the methodology, Godley and Lavoie's Stock-flow Consistent Approach (2007). The paper is developed along the following lines. First, a brief historical analysis investigates the roots of this class of models that can be traced as far back as 1949 and the work of Copeland. Second, the competing points of view regarding some of its main controversial aspects are underlined and used to classify the different methodological approaches followed in using these models. Namely, we discuss (1) how the models are solved, (2) the treatment of time and its implication, and (3) the need-or not-of microfoundations. These results are then used in the third section of the paper to develop a bifocal perspective, which allows us to divide the literature reviewed according to both its subject and the methodology. We explore various topics such as financialization, exchange rate modeling, policy implication, the need for a common framework within the post-Keynesian literature, and the empirical use of SFC models. Finally, the conclusions present some hypotheses (and wishes) over the possible lines of development of the stock-flow consistent models.

Suggested Citation

  • Eugenio Caverzasi & Antoine Godin, 2013. "Stock-flow Consistent Modeling through the Ages," Economics Working Paper Archive wp_745, Levy Economics Institute.
  • Handle: RePEc:lev:wrkpap:wp_745
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    References listed on IDEAS

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    1. Pulido Sanroman, Antonio, 2015. "La herencia de Klein (1920-2013): Una visión de futuro/The Legacy of Klein (1920-2013): A Vision of the Future," Estudios de Economía Aplicada, Estudios de Economía Aplicada, vol. 33, pages 359-384, Mayo.
    2. Lengnick, Matthias & Krug, Sebastian & Wohltmann, Hans-Werner, 2013. "Money creation and financial instability: An agent-based credit network approach," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 7, pages 1-44.
    3. Matheus Grasselli & Adrien Nguyen-Huu, 2016. "Inventory growth cycles with debt-financed investment," Papers 1610.00955, arXiv.org.
    4. Pascal Seppecher & Isabelle Salle, 2015. "Deleveraging crises and deep recessions: a behavioural approach," Applied Economics, Taylor & Francis Journals, vol. 47(34-35), pages 3771-3790, July.
    5. LE HERON Edwin & MAROUANE Amine, 2015. "A history of contemporary post Keynesian SFC model," Cahiers du GREThA 2015-15, Groupe de Recherche en Economie Théorique et Appliquée.
    6. Alexander Lipton, 2015. "Modern Monetary Circuit Theory, Stability of Interconnected Banking Network, and Balance Sheet Optimization for Individual Banks," Papers 1510.07608, arXiv.org.
    7. Giovanni Bernardo & Emanuele Campiglio, 2014. "A simple model of income, aggregate demand and the process of credit creation by private banks," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 41(3), pages 381-405, August.
    8. Eugenio Caverzasi, 2013. "The Missing Macro Link," Economics Working Paper Archive wp_753, Levy Economics Institute.
    9. Rodríguez-Vives, Marta & Giron, Celestino, 2017. "Leverage interactions: a national accounts approach," Statistics Paper Series 19, European Central Bank.
    10. Alessandro Caiani & Antoine Godin & Stefano Lucarelli, 2014. "A Stock Flow Consistent Analysis of a Schumpeterian Innovation Economy," Metroeconomica, Wiley Blackwell, vol. 65(3), pages 397-429, July.
    11. Christian De la Luz Tovar & Abigail Rodríguez Nava, 2016. "Metodología Stock-Flujo con Contabilidad Consistente (SFCC): una aplicación a la vinculación entre producción y financiamiento," Ensayos Revista de Economia, Universidad Autonoma de Nuevo Leon, Facultad de Economia, vol. 0(1), pages 91-122, May.
    12. Richters, Oliver, 2015. "Integrating Energy Use into Macroeconomic Stock-Flow Consistent Models," EconStor Theses, ZBW - German National Library of Economics, number 154764.
    13. repec:eee:ecolec:v:144:y:2018:i:c:p:228-243 is not listed on IDEAS
    14. Bruno Bonizzi, 2013. "Capital Flows to Emerging Markets: An alternative Theoretical Framework," Working Papers 186, Department of Economics, SOAS, University of London, UK.
    15. Alessandro Caiani & Antoine Godin & Stefano Lucarelli, 2014. "Innovation and finance: a stock flow consistent analysis of great surges of development," Journal of Evolutionary Economics, Springer, vol. 24(2), pages 421-448, April.
    16. Naqvi, Syed Ali Asjad, 2015. "Modeling Growth, Distribution, and the Environment in a Stock-Flow Consistent Framework," Ecological Economic Papers 4468, WU Vienna University of Economics and Business.
    17. Wayne, James J., 2014. "A Scientific Macroeconomic Model Derived from Fundamental Equation of Economics," MPRA Paper 59591, University Library of Munich, Germany.
    18. Eugenio Caverzasi, 2012. "From the Financial Instability Hypothesis to the theory of Capital Market Inflation: a structural interpretation of the sub-prime crisis," DEM Working Papers Series 018, University of Pavia, Department of Economics and Management.
    19. Li, Boyao, 2017. "The impact of the Basel III liquidity coverage ratio on macroeconomic stability: An agent-based approach," Economics Discussion Papers 2017-2, Kiel Institute for the World Economy (IfW).
    20. Miguel Carrion Alvarez & Dirk Ehnts, 2015. "The Roads Not Taken: Graph Theory and Macroeconomic Regimes in Stock-flow Consistent Modeling," Economics Working Paper Archive wp_854, Levy Economics Institute.
    21. James J. Wayne, 2015. "Predicting Major Economic Events with Accuracy: A New Framework for Scientific Macroeconomic Models," American Journal of Economics and Sociology, Wiley Blackwell, vol. 74(2), pages 419-456, March.
    22. John C. Boik, 2014. "First Microsimulation Model of a LEDDA Community Currency-Dollar Economy," Working Paper 0001, Principled Societies Project, revised Oct 2014.

    More about this item

    Keywords

    Stock-flow Consistent; Post-Keynesian; Literature Review;

    JEL classification:

    • B59 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Other
    • C69 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Other
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian

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