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Wynne Godley (1997) Macroeconomics Without Equilibrium or Disequilibrium, Levy Economics Institute, Working paper, n. 205


Abstract: This paper uses a simulation model to describe the role which bank money and bank loans musty play when decisions by households and firms are taken under conditions of uncertainty and when production takes time. Its main purpose is to integrate the theory of money and finance into that of income determination, in what may broadly be called the Keynesian tradition. Stocks of bank money and cash are found to be irretrievably endogenous. Great importance is attached to the accounting framework which, though simplified, comprises a comprehensive system of stocks and flows which enables sequential solutions to be found. The simulation method makes it possible to pin down exactly why the model behaves as it does. The model suggests the basis for a way of looking at the world which is fundamentally different from that used in the neoclassical paradigm.

Keywords: balance sheets, banks, credit, endogenous money, loans, Macroeconomics, profits, real time, simulation, Stocks and Flows

November 13, 2010 | Comments Closed