Flow of funds at the ECB

This article, “Flow-of-funds analysis at the ECB”, provides an excellent technical description of the European system for flow-of-fund statistics, and some good examples of how they are used at the ECB.
I would recommend it for anyone interesed in anyone doing SFC empirical modeling. It is a pity that the authors have not discovered yet the work of Godley and the book Monetary economics, which is well known at the Bank of England.

Report of the Dijon Workshop

by Antoine Godin and Mauro Napoletano

A wide variety of approaches, methodologies and topics were presented during the first workshop, allowing for interesting discussions and exchanges. Clearly, the complementarities of the Stock-Flow Consistent and Agent-Based approaches emerged, even if some were skeptical at first. The influence of finance, fiscal austerity and the construction of the euro zone are at the heart of applied work from both approaches. Furthermore, the topics and issues addressed by papers from both methodologies are similar. On the methodology side, SFC and ABM practitioners share issues regarding estimation or the role of expectations.  On the first issue, the workshop has featured some presentations about methods that could be used to improve the matching between theory and data in both SFC and ABMs. An open issue there, and that could be developed in future workshop, is how far to go in the model calibration and estimation exercises. Indeed, both types of exercises impose strong restrictions on models (e.g. about the ergodicity of the dynamics) which could be limiting in terms of the ability of the model to catch salient features of the reality or that could be hard to detect into some models. Furthermore, the ABM literature has developed robustness checks and stability analysis that need to be further developed in SFC models. This highlights the interest of confronting the two approaches.

This workshop also showed us the importance of getting together and confronting our analysis and results. In particular, the workshop has highlighted the strong complementarities existing between ABM and SFC models. On one hand, SFC models have so far been developed as general aggregative models, i.e. as systems of stock-flow consistent equations describing the laws of motion of the economy at the aggregate level. On the other hand, ABMs provide explicit micro-foundations to macroeconomic relations that, in ABMs, are emergent properties of the disequilibrium interactions occurring among heterogeneous agents. However, the use of the stock-flow consistent approach in ABMs has so far been limited (few exceptions to this are represented by the models of Kinsella et al., 2012 and by Seppecher and Salle, 2012, Raberto et al. 2012). The use of the stock-flow consistent approach in ABMs could thus contribute to improve the rigor of the micro-foundations provided by these models. However, it could also help to micro-found many of the Keynesian dynamics emphasized by SFC models. This is important also because, as it was pointed out in the workshop, SFC models are particularly suitable to study the effects of imbalances at the aggregate level. However, by construction, they cannot study the factors underlying the emergence of those imbalances, such as for example the factors leading to bubble-and-burst dynamics in asset markets. Finally, we should mention the possibility of having some kind of mixed models where some sectors are agent based and others aggregated. Combining ABM and SFC allows thus to offer a wide variety of models with more or less complexity and different levels of aggregation, depending of the subject under scrutiny.

References

–       Stephen Kinsella & Matthias Greiff & Edward J Nell, 2011. “Income Distribution in a Stock-Flow Consistent Model with Education and Technological Change,” Eastern Economic Journal, Palgrave Macmillan, vol. 37(1), pages 134-149.

–       Raberto, Marco & Teglio, Andrea & Cincotti, Silvano, 2012. “Debt, deleveraging and business cycles: An agent-based perspective,” Economics – The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 6(27), pages 1-49.

–       Seppecher, Pascal & Isabelle Salle, 2012. “A Two-Sector Agent-Based Model: Empirical Validation and Prospects” Unpublished.

An SFC model on Brazil

José Luis Oreiro gave me the link to this paper

Public Debt Management in a Dynamic Stock-Flow Consistent Model: Implications for the Brazilian case
Authors: Breno Santana Lobo – José Luis Oreiro

Abstract:
The existence of floating-rate bonds in the composition of public debt is associated with some factors that tend to negatively affect the trajectory of the economy over time. The main objective of this article is to analyze the changes caused by a change in the public debt composition over the dynamics of a given economy. In order to do that , we built a dynamic stock-flow consistent post-keynesian model, in which the government bond market is modeled to reflect the main features of the Brazilian case. The parameters and initial conditions of the model are calibrated in order to form a baseline scenario that reflects in a satisfactory way the main stylized facts of modern economies. The simulation results indicate that the extinction of floating-rate bonds does not have negative effects on the economy in the short run. In the long run, however, uncontrolled public spending due to an increase in the debt service takes the economy to a path of instability. To stabilize the economy, government should adjust its economic policy to its debt management policy. Fiscal policy, monetary policy and income policy may be used by the government. A restrictive fiscal policy can be useful to stabilize the economy. However, it is associated with smaller growth rates. An active fiscal policy, associated with some specific objective, can reverse this result, suggesting that the fiscal policy can contribute to control inflation. Restrictive monetary policy can also be used to stabilize the economy. However, it is not the best policy to control inflation. Income policy has the best results.

SFC sessions – FMM conference

After a first very fruitful workshop in Dijon (Going Further … Together: www.antoinegodin.eu/dijon) and a second venue in Limerick (Building a Common Language: www.antoinegodin.eu/limerick), which we hope to be highly stimulating, we will conclude this series of workshops in Berlin, during the FMM conference.

Indeed, two sessions (8 papers) will be dedicated to SFC modeling. We wish to remain within the areas described in the original call for papers (see attachment) and thus encourage papers addressing the following topics:
•    The theory of employment and unemployment
•    Possibilities and limitations of monetary and fiscal policy
•    Labor market institutions, active labor market policies, and decent jobs
•    Industrial policy, productivity and outsourcing
•    Green jobs and limits to growth
•    Working time and employment in a stagnating economy

However, papers treating other subjects related to the call for papers of the first two workshops (empirics, micro foundations, policy recommendation) will also be considered. Please note that all papers will be forwarded to the conference organizers should they decide to include SFC models in other sessions. Furthermore, more than one paper per author may be proposed, either via this call for paper or via the conference call for paper (fmm@boeckler.de).

The deadline for paper proposals is 30 June 2013. Please send an abstract (one page) to godin.antoine@gmail.com. Decisions will be made in early August. Registration forms for the introductory lectures and the conference will be made available online in mid-August. Accepted papers should be sent by 15 October to be posted on the conference web page.

Selected papers might be published after the conference in a special issue of the European Journal of Economics and Economic Policies: Intervention (EJEEP) dedicated to SFC modeling.

Visit the conference website for udpdates: http://www.boeckler.de/35334_42480.htm

Building a common language for Stock Flow Consistent Macro Models

SFC Workshop, Kemmy Business School, University of Limerick, 26-27 of August 2013

After a first very fruitful workshop in Dijon, we now turn to a second workshop in Limerick.

A wide variety of approaches, methodologies and topics were presented during the first workshop, allowing for interesting discussions and exchanges. Clearly, the complementarities of the Stock-Flow Consistent and Agent-Based approaches emerged, even if some were sceptical at first. Furthermore, the topics and issues addressed by papers from both methodologies are similar. On the methodology side, SFC and ABM practitioners share issues regarding estimation or the role of expectations.  The influence of finance, fiscal austerity and the construction of the euro zone are at the hart of applied work from both approaches.

This workshop also showed us the importance of getting together and confronting our analysis and results. The need to develop a common language surfaced. We will target this workshop, held at the University of Limerick, Ireland, to begin to work towards a common language for the posing of problems and the discovery of solutions to those problems.

Call for paper

We encourage papers building bridges between SFC and ABM methodologies. However any paper treating on either of the methodologies will be considered, as the goal is also to get together. The deadline for paper proposals is 30 June 2013. Please send an abstract (one page) to godin.antoine@gmail.com. Decisions will be made by mid-July.

Support

Hotel costs will be covered for all participants. Transportation costs will be covered for some participants (especially Ph.D. students), if requested when submitting a paper.

Stephen Kinsella

Antoine Godin

SFC Workshops – Going further … together

Dear all, the doodle gave its verdict for the Dijon venue: we will have the opportunity to set up a new collaboration between SFC practitioners on May 2 and 3. Those without any background but interested in the methodology and the functioning of this kind of modeling are also welcome.

Call for paper

In the first document we tried to classify the purposes of the meetings. However it was probably too ambitious seeking to structure the three workshops by topics: 1) state of art, 2) empirical issues and 3) theoretical aspects.

All those aspects are relevant and such that structuring the workshops is not required. The goal is to create a sustainable international collaboration between the researchers with more or less experienced but converging toward the same direction: the improvement of the SFC modeling framework in order to get forward in understanding the real world and provide alternative policy recommendations based on a robust diagnosis. Accordingly, the papers proposed should address any relevant theme aiming to achieve this goal.

Organization

The deadline for the submission of paper is March 10. The proposals, under the form of an extended abstract of 2 pages must be sent either to Antoine Godin (godin.antoine@gmail.com) or to Mickaël Clévenot (clevenot.mickael@gmail.com). For any logistical questions, contact M. Clévenot.

We intend to support transport costs or accommodation fees, or both costs depending on the number of participants. Note that only those who submit a paper within the deadline will obtain financial support. Of course any person interested in the workshop is welcome, at its own expenses. There is no participation fee.

The papers must be sent one month before the workshop so that other participants may read them, the papers will be uploaded on the sfc-models.net website. The papers may still be preliminary versions. Traditional sessions will be organized with a discussant. We will require all participants to be a discussant.

More informal sessions as round-table will be organized on the methodology and on the topics you want to address. For this purpose, let us know your wishes as soon as possible. This workshop is ours; it is up to us to make it a lever to move forward together.

To insure a wider diffusion of the ideas developed during the workshop, some sessions might be broadcasted on the internet.

Expecting you numerous, motivated, in a spirit of sharing.

M. Clévenot

A. Godin

Joining sfc-models.net

Anybody interested in contributing to the discussion on stock-flow-consistent modeling is very welcome to join us.
However, to avoid a growing number of fake registration, you should email the administrator if you wish to get a user id on this web site. Thank you!