Second International Workshop on Empirical SFC models

The Second International Workshop on Empirical Stock-Flow Consistent Models took place in Athens from November 21st to Nov. 22nd, 2024.
The first workshop took place in Aalborg on September 2023.
This year saw the following contributions:

  • Michalis Nikiforos (University of Geneva): Alternative Closures in SFC models
  • Gennaro Zezza (University of Cassino & Levy Economics Institute): Small is beautiful? On the best size of empirical SFC models
  • Antoine Godin (Agence Francaise de Développement, CEPN): Assessing the macrofinancial consequences of a Net Zero energy transition through hard coupled energy-macroeconomic models. A case study for Morocco
  • Giuliano Yajima (Levy Economics Institute): Implementing the Just Energy Transition (JET) in Colombia: a prototype Ecological Input Output Stock Flow Consistent Model (E-IO-SFC)
  • Luis Reyes (Kedge Business School) & Jacques Mazier: Economic policy efficiency and recovery in an open economy
  • Sebastian Valdecantos (Aalborg University): Bridging the gap between stock-flow consistent models and input-output analysis: An empirical application to Colombia
  • Francesco Zezza (University of Roma La Sapienza): Whats ahead for Meloni’s Italy? Fiscal policy and the revised Stability Pact
  • Hamid Raza (University of Aalborg) & Simon Thomsen: An Ecological Stock Flow consistent model of the Danish economy
  • Iwo Augustynski (Wroclaw University of Economics): Inventories, profits, prices and the transmission of post-covid shocks in Poland. A stock-flow consistent model
  • Adam George (SOAS): Green fiscal policy in an empirical UK E-SFC model
  • Huub Meijers (University of Maastricht): A post-mortem of interest rate policy: beware of financial fragility

Thank you to the National and Kapodistrian University of Athens, the Centre for Planning and Economic Research, and to the organizing committee: C. Pierros, N. Rodousakis, V. Missos.

More information will be provided in the coming weeks.

sfctools – A toolbox for stock-flow consistent, agent-based models

A new Python package has been released. The package is an open-source toolbox and touches both stock-flow consistent and agent-based modeling aspects. It also contains a graphical user interface.

Repository: https://gitlab.com/dlr-ve/esy/sfctools/framework

Installation via Pypi: https://pypi.org/project/sfctools/

Documentation: https://sfctools-framework.readthedocs.io/en/latest/

Paper: https://joss.theoj.org/papers/10.21105/joss.04980

Author: Thomas Baldauf, German Aerospace Center

A new paper to assess Job Guarantee proposals in a SFC framework

Giuliano Toshiro Yajima’s paper “Beyond Job Guarantee: The Employer of Last Resort Program as a Tool to Promote the Energy Transition” has been published in the Review of Political Economy

Author:
Giuliano Toshiro Yajima, Levy Economics Institute of Bard College

Abstract
We argue that a careful design of a program of direct employment and public provision by the state can have permanent effects and promote the structural and environmental transformation of the economy. Starting from this point, we develop a multisectoral stock-flow consistent model to study the long-run effects of the implementation of a job guarantee program, both in the original formulation of Minsky and in its recent version put forward as part of the ‘Green New Deal’ (GND) policy package. We also assess the impact of both ‘green’ and ‘brown’ standard fiscal expenditures, as well as a policy mix including industrial, environmental and employment measures. Results from our simulations point out that, in order to pursue the twin targets of full employment and environmental sustainability, the government should invest in gross fixed capital formation while both reducing energy consumption and acting as an employer of last resort in order to absorb the workforce expelled from the energy sector.

New contributions using the SFC approach

The purpose of this web site was to keep track of new research adopting the Stock-Flow Consistent (SFC) approach, possibly providing a full database of such research.
Alas, the success of the SFC approach has made this task almost impossible, given the number of papers published.
An example is provided by the works presented at the 26th FMM Conference held in Berlin. You can find the program, and papers uploaded by the authors, here:
26th FMM Conference: Post-Keynesian Economics and Global Challenges

A Prototype Regional Stock-Flow Consistent Model

Our new Zezza&Zezza paper “A Prototype Regional Stock-Flow Consistent Model” has come out as a Levy Institute Working Paper

We set up a three-region SFC model with labor mobility, to explore the implications of regional imbalances. Loosely calibrating the model on Italian North-South data, the model shows that the dependency of a poorer Southern region from imports will imply labor migration, as well as transfers of ownership of Southern real and financial assets to the other region. The model shows that, absent targeted policies, there is no automatic tendency to convergence in real income across regions.
Eviews code available here: https://gennaro.zezza.it/software/eviews/2022levywp.prg

Authors:
Francesco Zezza, Sapienza Università di Roma, Italy, and Levy Economics Institute of Bard College
Gennaro Zezza, Università degli Studi di Cassino e del Lazio Meridionale, Italy, and Levy Economics Institute of Bard College

Abstract
Starting from the seminal works of Wynne Godley (1999; Godley and Lavoie 2005, 2007a, 2007b), the literature adopting stock-flow consistent (SFC) models for two or more countries has been flourishing, showing that consistently taking into account real and financial markets of two open economies will generate different results with respect to more traditional open economy models. However, few contributions, if any, have modeled two regions in the same country, and our paper aims at filling this gap. When considering a regional context, most of the adjustment mechanisms at work in open economy models—such as exchange rate movements, or changes in interest on public debt—are simply not present, as they are in control of “external” authorities. So, what are the adjustment mechanisms at work?

To answer this question, we adapt the framework suggested in Godley and Lavoie (2007a) to consider two regions that share the same monetary, fiscal, and exchange rate policies. We loosely calibrate our model to Italian data, where the South (Mezzogiorno) has both a lower level of real income per capita and a lower growth rate than the North. We also introduce a fragmented labor market, as discouraged workers in the South will move North in hopes of finding commuting jobs.

Our model replicates some key features of the Italian economy and sheds light on the interactions between financial and real markets in regional economies with “current account” imbalances.

The Employer of Last Resort Scheme and the Energy Transition: A Stock-Flow Consistent Analysis

Giuliano Toshiro Yajima has just published a new Levy Institute working paper: “The Employer of Last Resort Scheme and the Energy Transition: A Stock-Flow Consistent Analysis”

Abstract
The health and economic crises of 2020–21 have revived the debate on fiscal policy as a major tool for stabilization and meeting long-term goals. The massive surge in unemployment, due to the economic disruption of the lockdown measures, has increased the interest in policies that target employment directly instead of trying to achieve it via a general “demand push.” One of the proposals currently under debate is the job guarantee. Under such a policy the government would act as an “employer of last resort” by offering a job to everyone that is able and wants to work but cannot find a job in the private sector. This paper argues that a carefully designed scheme of direct employment and public provision by the state—addressing both the low- and high-skill workforce—can have permanent effects and promote the economy’s structural transformation, in particular by fostering energy transition and a lower carbon footprint. Starting from this point, a stock-flow consistent model is developed to study the long-run effect of the job guarantee’s implementation, inspired by the work of Godin (2013) and Sawyer and Passarella (2021).

A stock-flow model for Argentina

Gabriel Michelena has published a new model for Argentina (in Spanish).
Available here: http://www.bcra.gov.ar/PublicacionesEstadisticas/Resumen.asp?id=1519&prevPage=2

Resumen
El presente documento desarrolla un modelo de Stock-Flujo Consistente (SFC)
para el análisis de las variables macroeconómicas de la Argentina. La principal
utilidad de los modelos SFC está asociada a la posibilidad de realizar
ejercicios contrafactuales para evaluar diferentes modificaciones de la política
fiscal, tributaria, monetaria y comercial. Estos modelos están caracterizados
por la utilización de matrices de contabilidad social (SAM), lo que permite
realizar una desagregación de la cuenta capital y de los instrumentos financieros
de cada sector institucional. Esto le otorga consistencia contable, ya que la
SAM contiene las principales transacciones del sector real, así como los flujos
monetarios entre las distintas instituciones: hogares, empresas, bancos, gobierno,
banco central y el resto del mundo. Este modelo fue elaborado con el objetivo de
realizar proyecciones de mediano plazo sobre los principales flujos y stocks de la
economía argentina, complementando los resultados de otros modelos existentes
en la literatura.

A Post-Keynesian stock-flow consistent model of the Global Financial Crisis and the Age of Secular Stagnation

Adam Kaczynski has recently completed his PhD with a thesis on “A Post-Keynesian stock-flow consistent model of the Global Financial Crisis and the Age of Secular Stagnation”.
The PDF is available here, and the corresponding code can be downloaded from Github.

Abstract:
This thesis is an attempt to build a dynamic, long run, Stock-Flow Consistent, Post Keynesian model of the Global Financial Crisis and Secular Stagnation. While multiple New Keynesian Dynamic Stochastic General Equilibrium models of these historic phenomena already exist, these models are built on theoretical foundations which have been rejected by Post Keynesians because of their inadequacy. The Sraffian Supermultiplier has been chosen as the theoretical framework, isolating parts of the economy generating instability from the parts which may set the trend in the long run. The model uses a continuous-time framework and is expressed as a differential-algebraic system of equations. It is simulated using an Open Source package OpenModelica which is widely used in empirical and technical sciences for simulating dynamic systems. While not calibrated by regression, and more theoretical than econometric, it nevertheless reproduces multiple macroeconomic phenomena and stylised facts which have puzzled mainstream economists. This research is an attempt to advance the macroeconomic modelling methodology and contribute to understanding macroeconomic processes by demonstrating how complex phenomena can emerge when simple parts of the economy interact. The understanding is based on sound macroeconomic theories built by Marx, Keynes, Kalecki, Sraffa and contemporary Post Keynesian economists.