Stock-Flow Consistent Modeling Through the Ages
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ECONOMICS 15.04.2020 Class No
ECONOMICS 15.04.2020 Class No. 2: Unit 1 (National Income and related aggregates) Objective: After the class/ content you will become familiar with Difference between Stock and flow , Circular flow of income (two sector model); Difference between Stock and flow : Stock Flow Quantity that is measured at a particular point of time Quantity that is measured at a period of time Static in nature. It is dynamic in nature No time dimension Time dimension Ex Capital, foreign debts, wealth, loan, inventories, Ex National Income, Expenditure, savings, opening stock , money supply depreciation, interest, exports, imports, change in money supply, borrowing, profit, rent Factors of production: Factors of production are the inputs needed for the creation of a good or service. The factors of production include land, labor, entrepreneurship, and capital. Factor Income (Factor Payment/Factor cost) Income generated by factor of production is called factor Income (or Factor Payment) that is Rent, Interest, profit and wages and salaries. Sectors in an economy : The Income generated normally flows in different sectors mentioned below: (i) Two sector Economy (Household and Firm) (ii) Three Sector Economy (Household, Firm and government) (iii) Four Sector Economy (Household, Firm, Government and abroad) Not in CBSE Syllabus Circular flow of income (in two sector Economy ): Real flow (Product/ Physical flow) Money Flow (Nominal Flow) Also called a circular flow of income in factor Also called a circular flow of income in money market market It refers to the flow of factor services from It refers to the flow of factor income (or payments) household sector to producing sector (Firm) and from producing sector (Firm) to household sector flow of goods and services from producing sector and flow of consumption expenditure from (Firm) to household sector. -
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European Journal of Economics and Economic Policies: Intervention, Vol. 15 No. 1, 2018, pp. 2–11 ‘The vigorous critique of the neo-Kaleckian or post- Kaleckian growth model is a measure of its success’ Interview with Marc Lavoie Marc Lavoie is a Senior Research Chair of the University of Sorbonne Paris Cité, located at the University of Paris 13, and he is a member of the Centre d’Économie de Paris- Nord (CEPN), France. Between 1979 and 2016 he taught at the University of Ottawa, Canada, where he is now an emeritus professor. He received a ‘doctorat honorifique’ from the University of Paris 13, France, in 2015. He is one of the managing editors of Metroeconomica and of the European Journal of Economics and Economic Policies: Intervention, and he is an IMK and FMM fellow. His latest work is Post-Keynesian Economics: New Foundations (2014) – an exhaustive account of post-Keynesian economic theory – for which he received the 2017 Myrdal Prize of the European Asso- ciation for Evolutionary Political Economy. How did you get interested in post-Keynesian or heterodox economics and how did you get in contact with post-Keynesian economists? I was a student at Carleton University, in Ottawa. I had chosen to go to this English- speaking university because I feared that I would be frustrated by not getting enough classes in French at the University of Ottawa, which is a bilingual university. At Carleton I knew everything would be in English anyway. In my fourth year, there was an honours seminar which was run by Tom Rymes – T.K. -
Maverick Who Endured with Ideas Undimmed
13/10/2017 FT.com / Comment / Obituaries - Maverick who endured with ideas undimmed COMMENT OBITUARIES FT Home > Comment > Obituaries Maverick who endured with ideas undimmed LATEST HEADLINES FROM CNN By Sue Cameron and John Llewellyn Published: May 14 2010 05:44 | Last updated: May 14 2010 05:44 Ex-jihadist at heart of Libya's revolution Proposed legal changes in China cause jitters Wynne Godley, who has died at the age of 83, achieved fame for his stringent attacks on the Yemen opposition considers using military to out Saleh monetarist doctrines of the Thatcherites – he once dismissed their policies as “a gigantic con Witnesses: Riot police clash with Bahrain demonstrators trick”. India's anti-corruption movement gains momentum More His dire warnings in the late 1970s that unemployment would rise to 3m in the 1980s earned him the title “Cassandra of the Fens” and were derided – until they came true. Jobs Business for sale Contracts & tenders Then, after years in the wilderness, with his research grant cut and academics giving him the cold shoulder, he returned to the establishment fold as one of the Treasury’s independent SEARCH Enter keywords forecasters. It was a tribute to his intellectual strength that he came through such setbacks to produce MARKETING EXECUTIVE APPOINTMENT With Career some of the most novel and insightful analysis of economies of his generation. What made his Progression achievements all the more singular was that he had started his career as a professional Cumberland Building Society musician. CUSTOMER SERVICES EXECUTIVE APPOINTMENT with Career Progression Wynne Alexander Hugh Godley was born in 1926, the younger son of Lord Kilbracken, an Cumberland Building Society Anglo-Irish peer. -
The Post-Keynesian Economics of Credit and Debt Marc Lavoie
The post-Keynesian economics of credit and debt Marc Lavoie Department of Economics, University of Ottawa November 2012 To take a not at all arbitrary example, a standard macroeconomic approach, the IS-LM model (don’t ask) told us that under depression-type conditions like those we’re experiencing, some of the usual rules would cease to apply: trillion-dollar budget deficits wouldn’t drive up interest rates, huge increases in the money supply wouldn’t cause runaway inflation. Economists who took that model seriously back in, say, early 2009 were ridiculed and lambasted for making such counterintuitive assertions. But their predictions came true. So yes, it’s possible to have social science with the power to predict events and, maybe, to lead to a better future. Paul Krugman, “Introduction” to Isaac Asimov, The Foundation Trilogy, The Folio Society, London, 2012, p. xv. Paul Krugman believes that it is enough to go back to the old IS-LM model to understand how the economy functions and to make predictions about what is about to happen. He is partially right and partially wrong. Certainly the current sophisticated models put forward by most of his mainstream colleagues did not allow for correct predictions. However, although we need to go back to macroeconomics before the new classical and rational expectations revolution, thus going beyond the representative agent with rational expectations (RARE as John King (2012) calls it), we certainly should not go back to the simple IS/LM model that Krugman is so enamoured with. The purpose of the session on the economics of credit and debt is to stimulate new thinking on credit and debt. -
The “Kansas City” Approach to Modern Money Theory
Working Paper No. 961 The “Kansas City” Approach to Modern Money Theory by L. Randall Wray Levy Economics Institute of Bard College July 2020 The Levy Economics Institute Working Paper Collection presents research in progress by Levy Institute scholars and conference participants. The purpose of the series is to disseminate ideas to and elicit comments from academics and professionals. Levy Economics Institute of Bard College, founded in 1986, is a nonprofit, nonpartisan, independently funded research organization devoted to public service. Through scholarship and economic research it generates viable, effective public policy responses to important economic problems that profoundly affect the quality of life in the United States and abroad. Levy Economics Institute P.O. Box 5000 Annandale-on-Hudson, NY 12504-5000 http://www.levyinstitute.org Copyright © Levy Economics Institute 2020 All rights reserved ISSN 1547-366X ABSTRACT Modern money theory (MMT) synthesizes several traditions from heterodox economics. Its focus is on describing monetary and fiscal operations in nations that issue a sovereign currency. As such, it applies Georg Friedrich Knapp’s state money approach (chartalism), also adopted by John Maynard Keynes in his Treatise on Money. MMT emphasizes the difference between a sovereign currency issuer and a sovereign currency user with respect to issues such as fiscal and monetary policy space, ability to make all payments as they come due, credit worthiness, and insolvency. Following A. Mitchell Innes, however, MMT acknowledges some similarities between sovereign and nonsovereign issues of liabilities, and hence integrates a credit theory of money (or, “endogenous money theory,” as it is usually termed by post-Keynesians) with state money theory. -
Mapping the Stock and Flow Structure of Systems Assigned: 16 September 2003; Due: 23 September 2003 This Is an Individual Assignment
System Dynamics Group Sloan School of Management Massachusetts Institute of Technology Introduction to System Dynamics, 15.871 System Dynamics for Business Policy, 15.874 Professor John Sterman Professor Brad Morrison Assignment 2 Mapping the Stock and Flow Structure of Systems Assigned: 16 September 2003; Due: 23 September 2003 This is an individual assignment. This assignment will give you practice with the structure and dynamics of stocks and flows. Stocks and flows are the building blocks from which every more complex system is composed. The ability to identify, map, and understand the dynamics of the networks of stocks and flows in a system is essential to understanding the processes of interest in any modeling effort. A. Identifying Stock and Flow Variables The distinction between stocks and flows is crucial for understanding the source of dynamics. In physical systems it is usually obvious which variables are stocks and which flows. In human and social systems, often characterized by intangible, “soft” variables, identification is more difficult. � A1. 2 points total. For each of the following variables, state whether it is a stock or a flow, and give units of measure for each. Name Type Units Example: Inventory of beer Stock Cases Example: Beer order rate Flow Cases/week _______________ Prepared by John Sterman, Feb 87; last revision Sept. 2003 � denotes a question for which you must hand in an answer, a model, or a plot. denotes a tip to help you build the model or answer the question. 2 Name Type Units a. Company Revenue b. Customer service calls on hold at your firm’s call center c. -
I. National Income and Product Accounts
Macroeconomic Definitions -- Dr. Tom McGahagan -- Spring 2005 I. NATIONAL INCOME AND PRODUCT ACCOUNTS 1. NIPA - the set of National Income and Product Accounts produced by the Bureau of Economic Analysis of the Department of Commerce, and published on their website (bea.doc.gov) 2. National income - the sum of all incomes earned from current production of goods and services, including wages, profits, rents, and interest payments. Does not include transfer payments such as Social Security or unemployment. 3. Personal income - that part of national income received by persons. This measure excludes the retained earnings of corporations. 4. Disposable personal income - After-tax personal income. 5. Circular flow model - a model of the economy which stresses the flow of goods from firms to households, and the flow of productive services from households to firms. Payment for those goods and services flows in the opposite direction. The simplest version of the model incorporates only goods markets and factor markets. Households make CONSUMPTION EXPENDITURES on the goods they purchase from firms, firms make FACTOR PAYMENTS for the productive services they receive from households. Since factor payments are another term for income, and since consumption expenditures are the firms' only source of revenue, the model shows that EXPENDITURE = INCOME. More elaborate versions of the model include financial markets, government and international markets. 6. Product accounts. Since expenditure on products is equal to income, keeping track of what is produced and sold should give the same result as adding up incomes. All product accounts try to give a picture of the production of final goods and services produced during the current year. -
The Environment As a Factor of Production
The Environment as a Factor of Production Timothy J. Considine and Donald F. Larson Abstract This paper develops a model of environmental resource use in production with an empirical analysis of how electric power companies consume and bank sulfur dioxide pollution permits. The model considers emissions, fuels, and labor as variable inputs with quasi-fixed inputs of permits and capital. Incorporating information from permit markets allows us to distinguish between user costs and asset shadow values. Our findings indicate that firms are holding stocks of pollution permits for reasons other than short-term cost savings. The results also reveal substantial substitution possibilities between emissions, permits stocks, and other factors of production. We speculate that anticipated secondary markets for carbon-offset inventories related to the flexibility mechanisms of the Kyoto Protocol will have similar effects for greenhouse-gas emitting firms. World Bank Policy Research Working Paper 3271, April 2004 The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the view of the World Bank, its Executive Directors, or the countries they represent. Policy Research Working Papers are available online at http://econ.worldbank.org. Timothy J. Considine is a Professor of Natural Resource Economics at Pennsylvania State University; Donald F. -
Spirit of Capitalism”
A System Dynamics Examination of the “Spirit of Capitalism” John Voyer, Ph.D. Professor of Business Administration [email protected] 207-780-4597 Herbert Smoluk, Ph.D. Professor of Finance [email protected] School of Business University of Southern Maine 96 Falmouth St. Portland, ME 04104 1 Abstract Starting in the mid 1990s, scholars in finance and economics have created a body of literature in a sub-field called the “Spirit of Capitalism.” Using sophisticated econometric models, authors in this sub-field demonstrated that this search for status seemed to drive stock-market volatility and economic growth and tended to make investors more risk averse. However, much of this work suffers from at least one serious flaw—it lacks operational thinking. The purpose of this paper is to begin an attempt at identifying the operational underpinnings, and the resulting underlying dynamics, of this “spirit of capitalism.” The paper offers two causal loop dynamic hypotheses and the beginnings of a stock-and-flow system dynamics model. It concludes with some thoughts about issues raised by the current paper, and with how the authors will address these issues and develop these ideas in future work. 2 A System Dynamics Examination of the “Spirit of Capitalism” Starting in the mid 1990s, scholars in finance and economics have created a body of literature in a sub-field called the “Spirit of Capitalism.” The sub-field’s name comes from the title of Max Weber’s book The Protestant Ethic and the Spirit of Capitalism (1904). The seminal sociologist argued there that the Calvinist Protestant tradition in northern Europe encouraged capitalist enterprise. -
A Stock and Flow Based Framework for Indicator Identification for Evaluation of Crop Production System
A Stock and Flow Based Framework for Indicator Identification for Evaluation of Crop Production System Siva Muthuprakash K. M. and Om P. Damani Centre for Technology Alternatives for Rural Areas (CTARA), Indian Institute of Technology Bombay, Powai, Mumbai 400076 India. [email protected] and [email protected] Abstract Crop production and crop yield has been the sole focus of most of the existing agricultural policies and interventions, which has resulted in several undesirable outcomes over a long term. To evaluate any production system holistically, it is necessary to identify a set of indicators accounting for economic, social and environmental dimensions. While the existing indicator selection frameworks help in identification of indicators, they lack a logically structured and transparent process. In this work, we develop a stock and flow based framework for a systematic selection of indicators for evaluating crop production systems. Stock and flow diagrams are used for conceptualization of the system and are sorted with respect to material, energy, and financial flows associated with the system. Various causal flows and their linkages are traced for each of the input-output component, and one representative indicator is selected for each causal flow. The indicators associated with desirable outcomes are taken in terms of input-output efficiency while undesirable outcomes are considered in terms of their absolute values. Using this process, a set of thirteen indicators have been identified for assessing the viability of agricultural practices with respect to socio- economic and ecological sustainability. Keywords: Systems Thinking, Stock and Flow Diagram, Indicators, Framework, Agricultural Policies Word count: 4644 words (Excluding reference section) 1. -
Wynne Godley – a Bibliography
Wynne Godley – A Bibliography Papers 1959 ‘Costs, Prices and Demand in the Short Run’, reprinted in M.J.C. Surrey (ed.), Macroeconomic Themes: Edited Readings in Macroeconomics with Commentaries (London: Oxford University Press, 1976) 1964 (with C. Gillion) ‘Measuring National Product’, National Institute Economic Review, February (with J.R. Shepherd) ‘Long-term Growth and Short-term Policy’, National Institute Economic Review, August (with C. Gillion) ‘Pricing Behaviour in the Engineering Industry’, National Institute Economic Review, August (with D.A. Rowe) ‘Retail and Consumer Prices 1955–1963’, National Institute Economic Review, November 1965 (with W.A.B. Hopkin) ‘An Analysis of Tax Changes’, National Institute Economic Review, May (with J.R. Shepherd) ‘Forecasting Imports’, National Institute Economic Review, August (with C. Gillion) ‘Pricing Behaviour in Manufacturing Industry’, National Institute Economic Review, August 1972 (with W.D. Nordhaus) ‘Pricing in the Trade Cycle’, Economic Journal, 82(327) (September): 853–82 (with J. Rhodes) ‘The Rate Support Grant System’, Proceedings of a Conference on Local Government Finance, Institute of Fiscal Studies, Publication no. 10 1973 (with T.F. Cripps) ‘Balance of Payments and Demand Management’, London and Cambridge Economic Bulletin, no. 82, January 1974 ‘Demand, Inflation and Economic Policy’, London and Cambridge Economic Bulletin, no. 84, January ‘The Concept of a Par Economy in Medium-term Analysis’, in G.D.N. Worswick and F.T. Blackbaby (eds) The Medium Term: Models of the British Economy (London: Heinemann) 377 378 Wynne Godley – A Bibliography 1975 (with A. Wood) ‘Profits and Stock Appreciation’, Economic Policy Review, no. 1, February 1976 (with T.F. Cripps) ‘A Formal Analysis of the Cambridge Economic Policy Group Model’, Economica, 43(172) (November): 335–48 (with T.F. -
Towards a Lasting Solution to Sovereign
Editors Note EVEN as US stock markets continue to exhibit resorting to depreciating their currencies to boost their considerable exuberance, with some registering record exports. This appears to have triggered off a currency highs, there is legitimate cause for concern about the war, a dangerous development which contributed to the health of the global economy. Great Depression of the 1930s. While the US economy appears to have shrugged There have also been a number of other worrisome off the worst effects of the 2007-08 Great Recession, developments which clearly reveal that the lessons of the truth is that its growth prospects are now handicapped the 2007-08 financial crisis have not been fully learnt. by a strong dollar. More critically, as US Federal Reserve One of these is the phenomenal growth of debt, a chief Janet Yellen noted in her recent testimony to the development which increases the risk of global financial US Senate, Foreign economic developments could instability. According to a recent McKinsey Global pose risks to the outlook for US economic growth. Her Institute report, since 2007, global debt has grown by primary concern here was presumably the economic $57 trillion, and no major economy has since decreased uncertainty gripping the eurozone. its debt-to-GDP ratio. Developing economies account Much of this uncertainty has centred on fears of a for roughly half of the growth in debt. Greek exit from the eurozone. Although Greece has Surprisingly, Chinas debts have grown managed to secure a four-month financial reprieve with exponentially so that today its total debt in relation to its its bailout plan, this has not eased concerns about a population is larger than that of the US.