Trends in Assets and Liabilities of Commercial Banks in the USA

Trends in Assets and Liabilities of Commercial Banks in the USA

To big to fail means too interconnected to fail.
As the balance sheets of banks have expanded so has their number of counterparties on both sides of balance sheets.

The US commercial banks have have expanded their balance sheets.

On assets side, the loans portfolio has expanded.

Low Interest Rates and Banks’ Profitability – Update October 2020

On liabilities side, the deposits and borrowings have increased.

US Federal Reserve publishes H8 report on Assets and Liabilities of the US commercial banks. Detailed information on aggregate data presented in this post can be obtained from it.

https://www.federalreserve.gov/releases/h8/h8notes.htm

On liabilities side, the borrowings from wholesale money markets and shadow banking contributed to systemic risk during 2008 financial crisis. Please see my posts on this subject.

Funding Strategies of Banks

Shadow Banking

There were also capital flows in US markets from foreign banks and other markets.

Low Interest Rates and International Capital Flows

On liabilities side, because of increased borrowings from short term markets, the financial interconnections have also increased resulting in systemic risk and financial contagion.

On assets side, because of increased volumes of loan portfolios, the systemic risk and chances for financial contagion have increased.

Balance Sheets, Financial Interconnectedness, and Financial Stability – G20 Data Gaps Initiative

Contagion in Financial (Balance sheets) Networks

For analytical framework, accounting approach (Post Keynesian Economics) is one of the option.

Balance Sheet Economics – Financial Input-Output Analysis (using Asset Liability Matrices) – Update March 2018

Foundations of Balance Sheet Economics

Economics of Money, Credit and Debt

Morris Copeland and Flow of Funds accounts

Stock-Flow Consistent Modeling

Key Terms

  • Money View
  • Money Flows
  • Stocks and Flows
  • System Dynamics
  • Business Dynamics
  • Business Strategy
  • Asset Liability Management ALM
  • Balance Sheet Economics
  • Monetary Policy
  • Interest Rates
  • Credit
  • Debt
  • Money
  • Balance Sheet Expansion
  • Systemic Risk
  • Interconnectivity
  • Loan Portfolio
  • To big to fail
  • Networks
  • Funding Strategy
  • Market Liquidity
  • Funding Liquidity
  • Deposits
  • Interest Income
  • Non Interest Income
  • Borrowings
  • Wholesale Money Markets
  • Shadow Banking
  • International Capital Flows
  • Round Tripping
  • Global Liquidity
  • Eurodollar Market
  • Money Market Mutual Funds
  • Quadruple Accounting
  • Morris Copeland
  • Hyman Minsky
  • Wynn Godley
  • Perry Mehrling

Image Source: Liberty Street Economics 2017

AVERAGE NET INTEREST MARGIN OF BANKS IN THE UNITED STATES FROM 1995 TO 2019
Image Source: Statista

NET INTEREST MARGIN FOR ALL U.S. BANKS (USNIM)
Image Source: FRED

Total Assets, All Commercial Banks (TLAACBW027SBOG)
Image Source: FRED

Total Liabilities, All Commercial Banks (TLBACBW027NBOG)
Image Source: FRED

DEPOSITS, ALL COMMERCIAL BANKS (DPSACBW027SBOG)
Image Source: FRED

My Related Posts

Balance Sheet Economics – Financial Input-Output Analysis (using Asset Liability Matrices) – Update March 2018

Foundations of Balance Sheet Economics

Balance Sheets, Financial Interconnectedness, and Financial Stability – G20 Data Gaps Initiative

Funding Strategies of Banks

Economics of Money, Credit and Debt

Low Interest Rates and International Capital Flows

Low Interest Rates and Banks’ Profitability – Update October 2020

Morris Copeland and Flow of Funds accounts

Key Sources of Research

Deposits, All Commercial Banks (DPSACBW027SBOG)

https://fred.stlouisfed.org/series/DPSACBW027SBOG

Total Liabilities, All Commercial Banks (TLBACBW027NBOG)

https://fred.stlouisfed.org/series/TLBACBW027NBOG

TOTAL ASSETS, ALL COMMERCIAL BANKS (TLAACBW027SBOG)

https://fred.stlouisfed.org/series/TLAACBW027SBOG

Between deluge and drought:
The future of US bank liquidity and funding

Rebalancing the balance sheet during turbulent times

McKinsey

2013

https://www.mckinsey.com/~/media/mckinsey/dotcom/client_service/Risk/Working%20papers/48_Future%20of%20US%20funding.ashx

Assets and Liabilities of Commercial Banks in the United States – H.8

https://www.federalreserve.gov/releases/h8/h8notes.htm

The geography of dollar funding of non-US banks1

A Brief History of Macro-Economic Modeling, Forecasting, and Policy Analysis

A Brief History of Macro-Economic Modeling, Forecasting, and Policy Analysis

 

From A History of Macroeconomics from Keynes to Lucas and Beyond

history-of-macro

 

From Modern Macroeconomic Models as Tools for Economic Policy

I believe that during the last financial crisis, macroeconomists (and I include myself among them) failed the country, and indeed the world. In September 2008, central bankers were in desperate need of a playbook that offered a systematic plan of attack to deal with fast- evolving circumstances. Macroeconomics should have been able to provide that playbook. It could not. Of course, from a longer view, macroeconomists let policymakers down much earlier, because they did not provide policymakers with rules to avoid the circumstances that led to the global financial meltdown.

Because of this failure, macroeconomics and its practitioners have received a great deal of pointed criticism both during and after the crisis. Some of this criticism has come from policymakers and the media, but much has come from other economists. Of course, macroeconomists have responded with considerable vigor, but the overall debate inevitably leads the general public to wonder: What is the value and applicability of macroeconomics as currently practiced?

 

There have been several criticisms of Main stream Economic Modeling from economists such as

  • Paul Romer
  • Willem H Buiter
  • Paul Krugman
  • R Cabellero
  • William White
  • Dirk Bezemer
  • Steve Keen
  • Jay Forrester
  • Lavoie and Godley

 

Issues with Neo Classical Models

  • No role of Money, Credit  and Finance
  • Lack of Interaction between Real and Financial sectors
  • Lack of Aggregate Demand
  • Rational Expectations and others.

 

Orthodox and Heterodox Modeling

  • Input Output Equations Models – Inter Industry Analysis
  • Structural Models
  • CGE and DSGE Models
  • VAR ( Vector Auto Regression ) Models
  • Stock flow Consistent Models
  • System Dynamics models

 

Neoclassical Models

  • Structural
  • VAR after Lucas Critique
  • DSGE (Dynamic Stochastic General Equilibrium Models)
  • DSGE – VAR

 

From HISTORY OF MACROECONOMETRIC MODELLING: LESSONS FROM PAST EXPERIENCE

The origin of macroeconometric modelling dates back to after World War II when Marschak organised a special team at the Cowles Commission by inviting luminaries such as Tjalling Koopmans, Kenneth Arrow, Trygve Haavelmo, T.W. Anderson, Lawrence Klein, G. Debreu, Leonid Hurwitz, Harry Markowitz, and Franco Modigliani (Diebold, 1998).

An interesting feature of macro modelling in this group was that there were three divisions to undertake the modelling procedures: first, economic theory or model specification; second, statistical inference (including model estimation, diagnostic tests and applications); and third, model construction which was dealing with data preparation and computations. The use of a team approach in macroeconometric modelling has been regarded as both cause and effect of large scale macroeconometric modelling (Intriligator, Bodkin and Hsiao, 1996).

Klein joined this team and conducted his first attempt in the mid 1940s to build a MEM for the US economy. See Klein (1983), Bodkin, Klein and Marwah (1991) and Intriligator, Bodkin and Hsiao (1996) for discussions of the MEMs which have been constructed for developed countries such as

  • the Klein interwar model,
  • the Klein-Goldberger model,
  • the Wharton model,
  • the DRI (Data Resources. Inc.) model,
  • the CANDIDE model,
  • the Brooking model etc.

 

 

History of Early Models

A. Klein Interwar Model

  • MODEL I
  • MODEL II
  • MODEL III
  • Developed in late 1940s

B. Klein -Goldberger Model

  • Developed at University of Michigan in 1950s.  Annual forecasts

C. BEA Model

  • Developed by L Klein.  Quarterly.  Operational in 1961. Transferred to BEA.  Eventually became BEA model.

D. Wharton Model

  • WHAR – III, with Anticipations
  • WHAR – MARK III
  • WHAR -ANNUAL
  • WEFA,  Project LINK
  • Wharton models were constantly operated until 2001.  DRI and WEFA merged to form Global Insight, Inc.

E. DRI Model

  • Built in 1969.  by Data Resources inc.  by Eckstein, Fromm, and Duessenbury.

F. Brookings Model

  • Developed by L Klein and J.S. Duessenberry. .  Quarterly.

G. MPS Model

  • FRB-MIT Model

H. The Hickman – Coen Model

  • Developed by Hickman and Coen for long term forecasting

I. FAIR model

  • Developed by Ray Fair at Princeton.  Now at Yale.  Available for free.

J. The St. Louis Model

  • Developed by FRB/ST.Louis

K. Michigan MQEM Model

  • Quarterly. DHL III

L. The Liu-HWA Model

  • Developed in 1970s.  Monthly.

M. WEFA -DRI/ Global Insight Model

  • Developed after merger of WEFA and DRI in 2001

N. Michigan MQEM /RSQE Model

  • Developed and extended in 1990s.  Replaced by Hymans RSQE model.

O. Current Quarterly Model

  • L Klein and Global Insight collaboration. L Klein died in 2013.

P. CANDIDE Model

  • Model developed for Canada

 

 

From Economic Theory, Model Size, and Model Purpose

models-7

 

 

From HISTORY OF MACROECONOMETRIC MODELLING: LESSONS FROM PAST EXPERIENCE

A Macro Econometric Model (MEM) is a set of behavioural equations, as well as institutional and definitional relationships representing the main behaviours of economic agents and the operations of an economy. The equations, or behavioural relations, can be empirically validated to capture the structure of a macroeconomy, and can then be used to simulate the effects of policy changes.

Macroeconometric modelling is multi- dimensional and both a science and an art. Bautista (1988) and Capros, Karadeloglou and Mentzas (1990) have classified macroeconomic models into broad groups: MEMS and CGE (computable general equilibrium) models.

Further, according to Challen and Hagger (1983, pp.2-22) there are five varieties of MEMs in the literature:

  • the KK (Keynes- Klein) model,
  • the PB (Phillips-Bergstrom) model,
  • the WJ (Walras-Johansen) model,
  • the WL (Walras-Leontief) model,
  • the MS (Muth-Sargent) model.

The KK model is mainly used by model builders in developing countries to explain the Keynesian demand-oriented model of macroeconomic fluctuations. They deal with the problems of short-run instability of output and employment using mainly stabilisation policies. The basic Keynesian model has been criticised as it does not consider the supply side and the incorporation of production relations. Furthermore, this modelling approach does not adequately capture the role of the money market, relative prices and expectations. As a response to the shortcomings associated with the KK model, the St Louis model was constructed by the monetarist critics (Anderson and Carlson, 1970) in order to highlight the undeniable impacts of money on the real variables in the economy.

The second type of MEM, the PB, emerged in the literature when Phillips (1954, 1957) used both the Keynesian and the Neoclassical theories within a dynamic and continuous time model to analyse stabilisation policy. Although the PB model is also a demand-oriented model, differential or difference equations are used to estimate its stochastic structural parameters. In essence, the steady state and asymptotic properties of models are thus examined in a continuous time framework. One should note that this modelling method in practice becomes onerous to implement especially for large scale models.

The third type of MEM, the WJ, can be referred to as a multi-sector model in which the economy is disaggregated into various interdependent markets, each reaching an equilibrium state by the profit maximising behaviour of producers and utility maximising actions of consumers in competitive markets. Similar to an input-output (IO) approach, different sectors in the WJ model are linked together via their purchases and sales from, and to, each other. However, it is different from an IO model as it is highly non-linear and uses logarithmic differentiation.

The fourth type of MEMs, known as the WL model, has been widely considered as the more relevant MEM for developing countries (Challen and Hagger, 1983). The WL model incorporates an IO table into the Walrasian general equilibrium system, enabling analysts to obtain the sectoral output, value added or employment given the values of the sectoral or aggregate final demand components.

Finally, the foundations of the MS model are based on the evolution of the theory of rational expectations. The MS model is similar to the KK model in that they both are dynamic, non-linear, stochastic and discrete. But in this model the formation of expectations is no longer a function of previous values of dependent variables. The forward looking expectation variables can be obtained only through solving the complete model. The New Classical School demonstrated the role of the supply side and expectations in a MEM with the aim of highlighting the inadequacy of demand management policies. To this end, Sargent (1976) formulated forward-looking variants of this model which suggest no trade-off between inflation and unemployment in the short term, which is in sharp contrast to both the Keynesian and Monetarist modelling perspectives.

It is noteworthy that the subsequent advances in the WJ and WL models led to the formulation of CGE modelling, which is categorised here as the second type of macroeconomic model. The Neoclassical CGE models are based on the optimising behaviour of economic agents. The main objectives of CGE models are to conduct policy analysis on resource economics, international trade, efficient sectoral production and income distribution (Capros, Karadeloglou and Mentzas, 1990).

The 1960s witnessed the flowering of the large scale macroeconometric modelling. This decade saw the construction of the Brookings model, in which an input-output table was incorporated into the model. Adopting the team approach in modelling procedure in the 1970s, the majority of model builders aimed at the commercialisation of the comprehensive macro models, such as DRI, Wharton and Chase, by providing information to private enterprises. Modellers designed their models on the basis of quarterly or monthly data with the goal of keeping the models up-to-date, for commercial gain. As a consequence of taking such measures, model-builders became commercially successful (Fair, 1987). It is believed that in this era, the full-grown models “would contribute substantively to enlarging our understanding of economic processes and to solving real- world economic problems” (Sowey and Hargreaves, 1991: 600).

During the last three decades, MEMs have been internationalised via Project LINK which was first operated at the University of Pennsylvania. In 1987 according to Bodkin (1988b) Project LINK consisted of 79 MEMs of individual countries or aggregations. In Project LINK the world is treated as a closed system of approximately 20,000 equations which “allow trade, capita flows, and possible exchange rate and other repercussions to influence systematically the individual national economies” (Bodkin, 1988b: 222).

 

From STRUCTURAL ECONOMETRIC MODELLING: METHODOLOGY AND TOOLS WITH APPLICATIONS UNDER EVIEWS

Since an early date in the twentieth century, economists have tried to produce mathematical tools which, applied to a given practical problem, formalized a given economic theory to produce a reliable numerical picture. The most natural application is of course to forecast the future, and indeed this goal was present from the first. But one can also consider learning the consequences of an unforeseen event, or measuring the efficiency of a change in the present policy, or even improving the understanding of a set of mechanisms too complex to be grasped by the human mind.

In the last decades, three kinds of tools of this type have emerged, which share the present modelling market.

  •   The “VAR” models. They try to give the most reliable image of the near future, using a complex estimated structure of lagged elements, based essentially on the statistical quality, although economic theory can be introduced, mostly through constraints on the specifications. The main use of this tool is to produce short term assessments.
  •   The Computable General Equilibrium models. They use a detailed structure with a priori formulations and calibrated coefficients to solve a generally local problem, through the application of one or several optimizing behaviors. The issues typically addressed are optimizing resource allocations, or describing the consequences of trade agreements. The mechanisms described contain generally little dynamics.

This is no longer true for the Dynamic Stochastic General Equilibrium models, which dominate the current field. They include dynamic behaviors and take into account the uncertainty in economic evolutions. Compared to the traditional models (see later) they formalize explicitly the optimizing equilibria, based on the aggregated behavior of individual agents. This means that they allow agents to adapt their behavior to changes is the rules governing the behaviors of others, including the State, in principle escaping the Lucas critique. As the model does not rely on traditional estimated equations, calibration is required for most parameters.

  •  The “structural” models. They start from a given economic framework, defining the behaviors of the individual agents according to some globally consistent economic theory. They use the available data to associate to these behaviors reliable formulas, which are linked by identities guaranteeing the consistency of the whole set. These models can be placed halfway between the two above categories: they do rely on statistics, and also on theory. To accept a formula, it must respect both types of criteria.

The use of this last kind of models, which occupied the whole field at the beginning, is now restricted to policy analysis and medium term forecasting. For the latter, they show huge advantages: the full theoretical formulations provide a clear and understandable picture, including the measurement of individual influences. They allow also to introduce stability constraints leading to identified long term equilibriums, and to separate this equilibrium from the dynamic fluctuations which lead to it.

Compared to CGEs and DSGEs, optimization behaviors are present (as we shall see later) and introduced in the estimated equations. But they are frozen there, in a state associated with a period, and the behavior of other agents at the time. If these conditions do not change, the statistical validation is an important advantage. But sensitivity to shocks is flawed, in a way which is difficult to measure.

 

From Macroeconomic Modeling in the Policy Process: A Review of Tools Used at the Federal Reserve Board and Their Relation to Ongoing Research

models-1models-2models-3

 

From Macroeconomic Modeling in the Policy Process: A Review of Tools Used at the Federal Reserve Board and Their Relation to Ongoing Research

models-4

 

USA Central Bank Models

A. FRB Models (Neo Classical)

  • MPS ( MIT-PENN-FRB)
  • FRB/US (since 1996)
  • FRB/MCM
  • FRB/WORLD
  • FRB/EDO
  • SIGMA
  • VAR Models
  • Accelerator Models

B.  FRB/NY DSGE Model

C.  FRB/Chicago DSGE Model

D. FRB/Philadelphia DSGE Model – PRISM

 

 

Newer Central Bank Models

From Macroeconomic Models for Monetary Policies: A Critical Review from a Finance Perspective

There has been a remarkable evolution of macroeconomic models used for monetary policy at major central banks around the world, in aspects such as model formulation, solution methods, estimation approaches, and importantly, communication of results between central banks. Central banks have developed many different classes and variants of macroeconomic models in the hopes of producing a reliable and comprehensive analysis of monetary policy. Early types of models included quantitative macroeconomic models1, reduced-form statistical models, structural vector autore- gressive models, and large-scale macroeconometric models, a hybrid form combining the long-run structural relationships implied by a partial equilibrium treatment of theory (e.g., the decision rule for aggregate consumption) and reduced-form short-run relationships employing error-correcting equations.

Over the past 20 years in particular, there have been significant advances in the specification and estimation for New Keynesian Dynamic Stochastic General Equilibrium (New Keynesian DSGE) models. Significant progress has been made to advance policymaking models from the older static and qualitative New Keynesian style of modeling to the New Keynesian DSGE paradigm. The New Keynesian DSGE model is designed to capture real world data within a tightly structured and self-consistent macroeconomic model. The New Keynesian DSGE model has explicitly theoretical foundations, allowing it to circumvent the Sims Critique (see Sims, 1980) and the Lucas Critique (see Lucas, 1976), and therefore it can provide more reliable monetary policy analysis than earlier models. A consensus baseline New Keynesian DSGE model has emerged, one that is heavily influenced by estimated impulse response functions based on Structural Vector Autoregression (SVAR) models. In particular, a baseline New Keynesian DSGE model has recently been shown by Christiano et al. (2005) to successfully account for the effects of a monetary policy shock with nominal and real rigidities. Similarly, Smets and Wouters (2003, 2007) show that a baseline New Keynesian DSGE model can track and forecast time series as well as, if not better than, a Bayesian vector autoregressive (BVAR) model. New Keynesian DSGE models have been developed at many central banks, becoming a crucial part of many of their core models.2 Sbordone et al. (2010) have emphasized that an advantage of New Keynesian DSGE models is that they share core assumptions about the behavior of agents, making them scalable to relevant details to address the policy question at hand. For example, Smets and Wouters (2007) introduced wage stickiness and investment frictions into their model, Gertler et al. (2008) incorporated labor market search and wage bargaining, and Bernanke et al. (1999), Chari et al. (1995) and Christiano et al. (2008) studied the interaction between the financial sector and macroeconomic activity.

The devastating aftermath of the financial crisis and the Great Recession has prompted a rethink of monetary policy and central banking. Central bank monetary policy models face new challenges. Many macroeconomists (and in fact, many of the world’s leading thinkers) have called for a new generation of DSGE models. The first and foremost critique of the current state of the art of New Keynesian DSGE models is that these models lack an appropriate financial sector with a realistic interbank market, and as a result, the models fail to fully account for an important source of aggregate fluctuations, such as systemic risk. Second, the linkage between the endogenous risk premium and macroeconomic activity is crucial for policymakers to understand the transmission mechanism of monetary policy, especially in financially stressed periods. In models that lack a coherent endogenous risk premium, policy experiments become unreliable in stressed periods, and the model cannot provide a consistent framework for conducting experimental stress tests regarding financial stability or macroprudential policy. Third, heterogeneity among the players in the economy is essential to our understanding of inefficient allocations and flows between agents. These inefficiencies have an extremely important effect on the equilibrium state of the economy. Without reasonable heterogeneity among agents in models, there is no way to infer the distributional effects of monetary policy.

Finally, and perhaps most importantly in terms of government policy, a new generation of models is in strong demand to provide policymakers a unified and coherent framework for both conventional and unconventional monetary policies. For example, at the onset of the financial crisis, the zero lower bound went from a remote possibility to reality with frightening speed. This led central banks to quickly develop unconventional measures to provide stimulus, including credit easing, quantitative easing and extraordinary forward guidance. These unconventional measures demanded a proper platform to be analyzed. Furthermore, these unconventional monetary policies have blurred the boundary between monetary policy and fiscal policy. Through these policies, central banks gave preference to some debtors over others (e.g. industrial companies, mortgage banks, governments), and some sectors over others (e.g. export versus domestic). In turn, the distributional effects of monetary policy were much stronger than in normal times. As a result, these measures are sometimes referred to as quasi-fiscal policy. As Sims emphasized, a reliable monetary policy experiment cannot ignore the effect of ongoing fiscal policy. In order to implement unconventional measures during the crisis, central banks put much more risk onto government balance sheets than ever before, which had the potential to lead to substantial losses. Thus the government balance sheets in these models should be forward-looking, and its risk characteristics are crucial to the success of the model. 

 

 

Other Central Banks Models

From Macro-Econometric System Modelling @75

A fourth generation of models has arisen in the early 2000s. Representatives are TOTEM (Bank of Canada, Murchinson and Rennison, 2006), MAS (the Modelling and Simulation model of the Bank of Chile, Medina and Soto, 2005), GEM (the Global Economic Model of the IMF, Laxton and Pesenti, 2003), BEQM (Bank of England Quarterly Model, Harrison et al, 2004), NEMO (Norwegian Economic Model at the Bank of Norway, Brubakk et al, 2006), The New Area Wide Model at the European Central Bank, Kai et al, 2008), the RAMSES model at the Riksbank (Adolfson et al, 2007), AINO at the Bank of Finland (Kuismanen et al, 2003), SIGMA (Erceg et al, 2006) at the U.S. Federal Reserve, and KITT (Kiwi Inflation Targeting Technology) at the Reserve Bank of New Zealand, Beneˇs et al, 2009.

From Macroeconomic Models for Monetary Policies: A Critical Review from a Finance Perspective

  • the Bank of Canada (QPM, ToTEM),
  • the Bank of England (MTMM, BEQM),
  • the Central Bank of Chile (MAS),
  • the Central Reserve Bank of Peru (MEGA-D),
  • the European Central Bank (NAWM, CMR),
  • the Norges Bank (NEMO),
  • the Sveriges Riksbank (RAMSES),
  • the US Federal Reserve (SIGMA, EDO),
  • the Central Bank of Brazil,
  • the Central Bank of Spain,
  • the Reserve Bank of New Zealand,
  • the Bank of Finland,
  • and IMF (GEM, GFM and GIMF).

In particular, the Bank of Canada, the Bank of England, the Central Bank of Chile, the Central European Bank, the Norges Bank, the Sveriges Rikbank, and the U.S. Federal Reserve have incorporated New Keynesian DSGE models into their core models.

 

 

Other Institutions Models

  • USA CBO (Congressional Budget Office)
  • USA OMB ( Office of Management and Budget)
  • USA Department of Energy – EIA Models
  • USA Bureau of Economic Analysis (BEA) Model
  • University of Michigan RSQE Model
  • World Bank
  • UN
  • IMF
  • OECD
  • FAIR US and MC Model at Yale University

 

Other Governmental Agencies Models

  • PITM Model
  • MATH Model
  • KGB Model
  • TRIM Model
  • Claremont Model

 

Private Sector Forecasting Models

  • The Conference Board
  • Wells Fargo
  • JP Morgan
  • Citi
  • Oxford Economics
  • Moody’s Analytics
  • IHS Inc./Global Insight

 

Old Non Governmental Models

  • DRI (Data Resources Inc.)
  • Chase Econometrics
  • Wharton Econometrics

They all merged into an entity IHS, Inc.

In 1987 Wharton Econometric Forecasting Associates (WEFA) merged with Chase Econometrics, a competitor to DRI and WEFA,[13] and in 2001 DRI merged with WEFA to form Global Insight.[14][15] In 2008 Global Insight was bought by IHS Inc., thus inheriting 50 years of experience and more than 200 full-time economists, country risk analysts, and consultants. [16]

 

The following book is a good resource for Lists of Models used in various countries.

  • Macroeconometric Models By Władysław Welfe

 

 

Heterodox Models

 

  • System Dynamics Models
  • Stock Flow Consistent Models
  • Flow of Funds Models
  • Agent based Computational Models
  • Network Economics Approaches

 

From Can Disequilibrium Macroeconomic Models Be Used to Anticipate Financial Instability? A Case Study

Two other approaches to modeling the macroeconomy are flow-of-funds models and stock-flow consistent models, and a fourth is agent-based models. All trace unfolding processes rather than equilibrium snapshots, and are so evolutionary. SFC models also differ from DSGE models in that they aim to be financially complete (but obviously stylized) representations of the economy.

 

Please see my other posts on Heterodox Modeling.

Increasing Returns, Path Dependence, Circular and Cumulative Causation in Economics

Jay W. Forrester and System Dynamics

Micro Motives, Macro Behavior: Agent Based Modeling in Economics

Stock-Flow Consistent Modeling

Foundations of Balance Sheet Economics

Contagion in Financial (Balance sheets) Networks

 

 

Key People:

  • Jan Tinbergen
  • Lawrance Klein
  • Wassily Leontief
  • Tjalling Koopmans
  • Franco Modigliani
  • Kenneth Arrow
  • Trygve Haavelmo
  • T.W. Anderson
  • G. Debreu
  • Leonid Hurwitz
  • Harry Markowitz
Key Sources of Research:

 

 

Macroeconomic Models, Forecasting, and Policymaking

Andrea Pescatori and Saeed Zaman

Click to access 0_New_14947.pdf

 

 

The Evolution of Macro Models at the Federal Reserve Board

􏰃Flint Brayton, Andrew Levin, Ralph Tryon, and John C. Williams

Revised: February 7, 1997

Click to access 199729pap.pdf

 

 

A Guide to FRB/US

A Macroeconomic Model of the United States

Macroeconomic and Quantitative Studies 􏰂 Division of Research and Statistics Federal Reserve Board Washington, D.C. 20551

version 1.0, October 1996

Click to access 199642pap.pdf

 

 

The FRB/US Model: A Tool for Macroeconomic Policy Analysis

Flint Brayton, Thomas Laubach, and David Reifschneider

2014

https://www.federalreserve.gov/econresdata/notes/feds-notes/2014/a-tool-for-macroeconomic-policy-analysis.html

https://www.federalreserve.gov/econresdata/frbus/us-models-package.htm

https://www.federalreserve.gov/econresdata/frbus/us-documentation-papers.htm

https://www.federalreserve.gov/econresdata/frbus/us-technical-qas.htm

https://www.federalreserve.gov/econresdata/notes/feds-notes/2014/november-2014-update-of-the-frbus-model-20141121.html

 

 

Estimated Dynamic Optimization (EDO) Model

https://www.federalreserve.gov/econresdata/edo/edo-models-about.htm

https://www.federalreserve.gov/econresdata/edo/edo-model-package.htm

https://www.federalreserve.gov/econresdata/edo/edo-documentation-papers.htm

 

 

The FRBNY DSGE Model

Marco Del Negro Stefano Eusepi Marc Giannoni Argia Sbordone Andrea Tambalotti Matthew Cocci Raiden Hasegawa M. Henry Linder

 

2013

Click to access sr647.pdf

 

 

Can Disequilibrium Macroeconomic Models Be Used to Anticipate Financial Instability?

A Case Study

Dirk J. Bezemer

 

Click to access a6d8daa2716892ed0984f8aa0882c6dccefc.pdf

 

 

Central Bank Models:Lessons from the Past and Ideas for the Future

John B. Taylor

November 2016

Click to access Text_Keynote_BoC_Workshop_Taylor-2016.pdf

 

 

DSGE models and central banks

by Camilo E Tovar

2008

Click to access work258.pdf

 

 

Macro-Finance Models of Interest Rates and the Economy

Glenn D. Rudebusch∗
Federal Reserve Bank of San Francisco

Click to access 3c8c75a3daa52749dd4ade71f9ae1642f9aa.pdf

 

 

Panel Discussion on Uses of Models at Central Banks

ECB Workshop on DSGE Models and Forecasting September 23, 2016

John Roberts

 

Click to access Roberts_Panel_discussion.pdf

 

 

The Chicago Fed DSGE Model

Scott A. Brave Jerey R. Campbell  Jonas D.M. Fisher  Alejandro Justiniano

August 16, 2012

https://www.chicagofed.org/publications/working-papers/2012/wp-02

 

 

Macroeconomics and consumption: Why central bank models failed and how to repair them

John Muellbauer

21 December 2016

http://voxeu.org/article/why-central-bank-models-failed-and-how-repair-them

 

 

Model Comparison and Robustness: A Proposal for Policy Analysis after the Financial Crisis

Volker Wieland

1st Version: November 28, 2010 This Version: March 21, 2011

 

Click to access Wieland_CournotConf_110321.pdf

 

 

TOBIN LIVES: INTEGRATING EVOLVING CREDIT MARKET ARCHITECTURE INTO FLOW OF FUNDS BASED MACRO- MODELS

John Duca and John Muellbauer

September 2012

 

Click to access paper622.pdf

 

 

FRB/US Equations Documentation

Click to access frbus_equation_documentation.pdf

 

 

Challenges for Central Banks’ Macro Models

Jesper Lindé, Frank Smets and Rafael Wouters

2016

 

Click to access rap_wp323_160512.pdf

 

 

Central Bank Models: Lessons from the Past and Ideas for the Future

John B. Taylor

2016

 

Click to access central-bank-models-lessons-past.pdf

 

 

Lawrence R. Klein: Macroeconomics, econometrics and economic policy􏰑

Ignazio Visco

2014

 

Click to access Visco_Klein_2014.pdf

 

 

Macro-Econometric System Modelling @75

Tony Hall  Jan Jacobs Adrian Pagan

Click to access WP95.pdf

 

 

The Econometrics of Macroeconomic Modelling

Gunnar Ba ̊rdsenØyvind Eitrheim Eilev S. Jansen Ragnar Nymoen

Click to access master210104.pdf

 

 

The Macroeconomist as Scientist and Engineer

N. Gregory Mankiw

May 2006

 

http://scholar.harvard.edu/files/mankiw/files/macroeconomist_as_scientist.pdf?m=1360042085

 

 

 Macroeconometric Models

By Władysław Welfe

 

 

HISTORY OF MACROECONOMETRIC MODELLING: LESSONS FROM PAST EXPERIENCE

Abbas Valadkhani

 

Click to access Valadkhani_131.pdf

 

 

ECONOMETRICS: AN HISTORICAL GUIDE FOR THE UNINITIATED

by D.S.G. Pollock

University of Leicester

Click to access dp14-05.pdf

 

 

RBI-MSE Joint Initiative on Modeling the Indian Economy for Forecasting and Policy Simulations

N R Bhanumurthy NIPFP, New Delhi, India

 

Click to access Model-1.pdf

 

 

ECONOMIC MODELS

 

Click to access chap1.pdf

 

 

MACROECONOMIC MODELLING OF MONETARY POLICY

BY MATT KLAEFFLING

SEPTEMBER 2003

https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp257.pdf?62a2706261fcf6fb02a681c780f3408f

 

 

Macroeconomic Modeling in India

N R Bhanumurthy NIPFP, New Delhi, India

 

Click to access India-Macroeconomic%20modeling%20in%20India.pdf

 

 

Macroeconomic Modeling in the Policy Process: A Review of Tools Used at the Federal Reserve Board and Their Relation to Ongoing Research

 

Michael Kiley

 

Click to access Apresentação%20Michael%20Kiley.pdf

 

 

Policy Analysis Using DSGE Models: An Introduction

Argia M. Sbordone, Andrea Tambalotti, Krishna Rao, and Kieran Walsh

2010

 

Click to access 1010sbor.pdf

 

 

DSGE Model-Based Forecasting

Marco Del Negro Frank Schorfheide

Staff Report No. 554 March 2012

 

Click to access 2761a45dbc2a4b57990d250adb8ae846129f.pdf

 

 

The Use of (DSGE) Models in Central Bank Forecasting: The FRBNY Experience

Marco Del Negro

 

Click to access DelNegro_DSGE_forecasting_panel.pdf

 

 

Modern Macroeconomic Models as Tools for Economic Policy

Narayana Kocherlakota

 

Click to access 2009_mplsfed_annualreport_essay.pdf

 

 

STRUCTURAL ECONOMETRIC MODELLING: METHODOLOGY AND TOOLS WITH APPLICATIONS UNDER EVIEWS

 

Click to access structmodel.pdf

 

 

Macroeconomic Models for Monetary Policies: A Critical Review from a Finance Perspective∗

Winston W. Dou †, Andrew W. Lo‡, and Ameya Muley

This Draft: March 12, 2015

Click to access MacroFinanceReview_v11_DLM.pdf

 

 

Lawrence R. Klein 1920-2013: Notes on the early years

Olav Bjerkholt, University of Oslo

 

 

A History of Macroeconomics from Keynes to Lucas and Beyond

 

By Michel De Vroey

2016

 

 

Economic Theory, Model Size, and Model Purpose

John B Taylor

Chapter in a Book Large Scale Macroe conomtric Models

1981

 

Economics of Money, Credit and Debt

Economics of Money, Credit and Debt

Global Financial Crisis and subsequent Global recession ( Secular Stagnation) has invoked lot of research in the causes of GFC.  Post Keynesian Economists were particularly correct about predicting the GFC.  Main stream Neoclassical Economists and their DSGE models did not predict the crisis.  Great Moderation was the main explanation given by neoclassical economists.  Low volatility in economic growth was seen as calm waters with no turbulence ahead.  GFC proved them wrong.

There are several development prior to GFC.

  • Role of Financial Sector
  • Rise of Credit and Debt
  • Rise of Shadow Banking
  • Securitization
  • Financial Globalization
  • Income Inequality
  • Lowered Credit standards
  • Lowered ratings standards by Rating Agencies
  • Global Capital flows

There are several outstanding researchers who are developing new ideas and thinking about the Banks, Money, Credit and Debt, Shadow Banking, Income Inequality, Effective demand, Low Interest Rates, Endogenous money and others.

  • Hierarchy of Money and Credit
  • Institutionalism
  • Accounting Approach
  • Quadruple Entry system
  • Endogenous Sources of Instability
  • Credit is debt 
  • Inherent Instability of Credit
  • Endogenous Creation of Money
  • Effective Demand
  • Lender of Last Resort
  • Open Economies
  • Interlinkages among economic agents 
  • Effectiveness of Monetary Policies
  • Federal Reserve Open Market operations
  • Shadow Banking
  • Fiscal Policies
  • Global Coordination and Cooperation
  • International Lender of Last Resort
  • Swap Network Among Central Banks
  • Regulation of Banks
  • Liquidity and Solvency
  • Capital, Reserve, Liquidity Ratios
  • Capital Flows across borders
  • Linkages among Financial Markets
  • Cross border Spillovers
  • Impact of Low Interest Rates
  • Stock flow Consistency
  • Essential Hybridity ( Public vs Private Money, Local vs Global )
  • Interdependence among Markets, Institutions and Market Infrastructure
  • Payment, clearing and Settlement Systems
  • Interlinked Balancesheets, Credit Chains, Repo Chains

 

Key People:

  • Steve Keen
  • Marc Lavoie
  • Dirk Bezemer
  • Richard Werner
  • Perry Mehrling
  • Hyun Song Shin

Also see

  • Richard Koo
  • Adair Turner
  • Gennaro  Zezza
  • Wynn Godley
  • Hyman Minsky
  • Zoltan Pozsar
  • Claudio Borio

 

Key Sources of Research:

 

The Inherent Hierarchy of Money

Perry Mehrling

January 25, 2012

 

Click to access Mehrling_P_FESeminar_Sp12-02.pdf

 

 

Economics of Credit and Debt

Daniel H. Neilson†

18 November 2012

 

Click to access inet2012neilson_economicsofcredit.pdf

􏰀􏰁􏰂􏰃􏰄􏰂􏰅􏰃􏰆􏰇􏰈􏰉􏰊􏰋􏰌􏰃􏰍􏰎􏰋􏰂

 

The New Lombard Street How the Fed became the dealer of last resort

Perry Mehrling April 4, 2010

 

http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.461.6478&rep=rep1&type=pdf

 

 

Why central banking should be re-imagined

Perry Mehrling

 

Click to access bispap79i.pdf

 

 

A Money View of Credit and Debt

November 4, 2012

Perry Mehrling

Click to access inet2012mehrling_amoneyviewofcreditanddebt.pdf

 

 

Why is money difficult?

Perry Mehrling

BCRA, Buenos Aires

June 4, 2015

 

Click to access JMB_2015_Mehrling.pdf

 

 

Central Bank Deleveraging and Financial Sector Regulation

Perry Mehrling

Minsky Conference, DC

April 15, 2015

Click to access minsky2015_mehrling.pdf

 

 

Modern Money: Fiat or Credit?

Author(s): Perry Mehrling
Source: Journal of Post Keynesian Economics, Vol. 22, No. 3 (Spring, 2000), pp. 397-406

 

Click to access Mehrling%20Fiat.pdf

 

 

Shadow Banking, Central Banking, and the Future of Global Finance

Perry Mehrling

Shadow Banking: A European Perspective City University London
Feb 2, 2013

 

Click to access Mehrling_Future-Global-Finance-126sn0t.pdf

 

Five Key Features of Modern Monetary Systems

New Thinking in Finance, London February 12, 2014

Perry Mehrling

 

Click to access 20140212_0930_Perry_Mehrling.pdf

 

 

Elasticity and Discipline in the Global Swap Network

Perry Mehrling1∗

Working Paper No. 27 November 12, 2015

 

Click to access WP27-Mehrling.pdf

 

 

The Credit Money and State Money Approaches

L. Randall Wray

Working Paper No. 32

April 2004

 

Click to access wray_-_state_and_credit_theories_of_money.pdf

 

 

Bagehot was a Shadow Banker:
Shadow Banking, Central Banking, and the Future of Global Finance

Perry Mehrling, Zoltan Pozsar, James Sweeney, Daniel H. Neilson

February 22, 2013

 

Click to access Paper_Sweeney.pdf

 

 

The rise of asset management and capital market-based financing: a cyclical or a structural shift?

Perry Mehrling

ECMI, Brussels October 20, 2015

 

Click to access Perry%20Mehrling.pdf

 

 

 

Credit theory of money

http://research.omicsgroup.org/index.php/Credit_theory_of_money

 

 

The Credit Theory of Money

By A. Mitchell Innes

From The Banking Law Journal, Vol. 31 (1914), Dec./Jan., Pages 151-168.

https://www.community-exchange.org/docs/The%20Credit%20Theoriy%20of%20Money.htm

 

 

WHAT IS MONEY?

By A. MITCHELL INNES

From The Banking Law Journal, May 1913.

https://www.community-exchange.org/docs/what%20is%20money.htm

 

 

Schumpeter Might Be Right Again: The Functional Differentiation of Credit

 

Dirk J. Bezemer

 

Click to access the_functional_differentiation_of_credit.pdf

 

 

The post-Keynesian economics of credit and debt

Marc Lavoie
Department of Economics, University of Ottawa

November 2012

 

 

Click to access inet2012lavoie_post-keynesianeconomics.pdf

 

 

The role of State and the Hierarchy of Money

Stephanie Bell

2001

Click to access Bell%20The%20Role%20of%20the%20State%20and%20the%20Hierarchy%20of%20Money.pdf

 

 

THE HIERARCHY OF MONEY

Stephanie Bell

1998

 

Click to access 231.pdf

 

 

Towards a theory of shadow money

Daniela Gabor and Jakob Vestergaard

Click to access Towards_Theory_Shadow_Money_GV_INET.pdf

 

 

The economic consequences of “market-based” lending

Carolyn Sissoko

May 24, 2016

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2766693

 

 

Money creation in the modern economy

Michael McLeay, Amar Radia and Ryland Thomas

 

Click to access qb14q1prereleasemoneycreation.pdf

 

 

Money in the modern economy: an introduction

Michael McLeay, Amar Radia and Ryland Thomas

Click to access qb14q1prereleasemoneyintro.pdf

 

 

Banks are not intermediaries of loanable funds — and why this matters

Zoltan Jakab  and Michael Kumhof

Click to access wp529.pdf

 

 

Where Does Money Come From?

NEF

2012

http://www.neweconomics.org/publications/entry/where-does-money-come-from

 

 

Explaining money creation by commercial banks: Five analogies for public education

 

Ib Ravn

Click to access Ravn71.pdf

 

 

The Truth about Banks 

Michael Kumhof and Zoltán Jakab

2016

 

Click to access kumhof.pdf

 

 

How do banks create money, and why can other firms not do the same? An explanation for the coexistence of lending and deposit-taking 

Richard A. Werner

2014

http://www.sciencedirect.com/science/article/pii/S1057521914001434

 

 

Can banks individually create money out of nothing? — The theories and the empirical evidence 

Richard A. Werner

http://www.sciencedirect.com/science/article/pii/S1057521914001070

 

 

A lost century in economics: Three theories of banking and the conclusive evidence

Richard A. Werner

2016

http://www.sciencedirect.com/science/article/pii/S1057521915001477

 

 

Money and credit as means of payment: A new monetarist approach 

Sébastien Lotza, , Cathy Zhang

http://www.sciencedirect.com/science/article/pii/S0022053115001441

 

 

Head and Tail of Money Creation and its System Design Failures

– Toward the Alternative System Design

2016

Kaoru Yamaguchi, Ph.D.

Yokei Yamaguchi

Click to access Head-and-Tail-2016_WP__-_Japan_Futures_Research_Center.pdf

 

 

Applying the Quantity Theory of Credit: The role of the ECB in the propagation of the European financial and sovereign debt crisis and the policy implications

Professor Richard A. Werner

Click to access werner_qtc_ecb_and_policy.pdf

 

 

Towards a New Research Programme on ‘Banking and the Economy

Implications of the Quantity Theory of Credit for the Prevention and Resolution of Banking and Debt Crises

Richard A. Werner

Click to access Werner_IRFA_QTC_2012.pdf

 

 

ECONOMICS AS IF BANKS MATTERED: A CONTRIBUTION  BASED ON THE INDUCTIVE METHODOLOGY

RICHARD WERNER

 

Click to access 41_Man_Sch_2011_Werner_Disaggregated_Credit.pdf

 

 

The Quantity Theory of Credit and Some of its Applications

Richard Werner

 

Click to access RW301012PPT.pdf

 

 

Banks As Social Accountants And Social Controllers: Credit and Crisis in Historical Perspective

Dirk J Bezemer

 

Click to access MPRA_paper_15766.pdf

 

 

MONETARY POLICY AND FINANCIAL STABILITY IN THE MODERN ECONOMY

Adair Turner

2016

 

Click to access aturner_2016.pdf

 

 

Towards a New Monetary Paradigm: A Quantily Theorem of Disaggregated Credit evidence from Japan

Richard A. Werner

1997

 

Click to access KK_97_Disaggregated_Credit.pdf

 

 

Do shadow Banks Create Money?

Jo Michell

2016

 

Click to access PKWP1605.pdf

 

 

The political economy of repo markets

Daniela Gabor

 

Click to access gabor_political_economy_of_repo_markets_0.pdf

Bezemer, Dirk J.

 

 

“This is Not a Credit Crisis–It is a Debt Crisis.”

Economic Affairs 29.3 (2009): 95-97.

Click to access 0deec52ce89025980b000000.pdf

 

 

Explaining the Great Moderation: Credit and the Macroeconomy Revisited

D Bezemer

2009

 

Click to access MPRA_paper_15893.pdf

 

 

Understanding financial crisis through accounting models

Dirk J. Bezemer

2010

 

Click to access 00b4952ce88deab0d2000000.pdf

 

 

“No One Saw This Coming”

Understanding Financial Crisis Through Accounting Models*

Dirk J Bezemer

Click to access Study-Bezemer-No-one-saw-this-coming.pdf

 

 

Credit In Current Orthodoxy: An Appraisal

Dirk J Bezemer

Click to access Bezemer.pdf

 

 

From Boom to Bust in the Credit Cycle: the Role of Mortgage Credit

By DIRK BEZEMER AND LU ZHANG

September 4, 2014

Click to access 14025_GEM_def.pdf

 

 

A Monetary Minsky model of the Great Moderation and the Great Recession

Steve Keen

2011

Click to access JEBO_2672.pdf

 

 

Balance Sheet Recession as the Other-Half of Macroeconomics

Richard C. Koo

Chief Economist Nomura Research Institute

October 14, 2012

The World in Balance Sheet Recession: What Post-2008 West Can Learn from Japan 1990-2005

 

Richard C. Koo Chief Economist

2012
Central Banks in Balance Sheet Recessions: A Search for Correct Response

 

Richard C. Koo

Chief Economist Nomura Research Institute

March 31, 2013

 

 

 

DEBT, MONEY AND MEPHISTOPHELES: HOW DO WE GET OUT OF THIS MESS?

ADAIR TURNER

2013

Click to access DEBT-MONEY-AND-MEPHISTOPHELES-HOW-DO-WE-GET-OUT-OF-THIS-MESS.pdf

 

 

 

DEBT AND LENDING: A CRI DE COEUR

wynne godley and gennaro zezza

2006

Click to access pn_4_06.pdf

 

 

 

Are Housing Prices, Household Debt, and Growth Sustainable?
Dimitri B. Papadimitriou  Edward Chilcote  Gennaro Zezza

January 2006

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1833609

 

 

 

How Fragile is the U.S. Economy?

DIMITRI B. PAPADIMITRIOU, ANWAR M. SHAIKH, CLAUDIO H. DOS SANTOS

and GENNARO ZEZZA

2005

Click to access stratan-feb-05-draft.pdf

Stock-Flow Consistent Modeling

PK-SFC Modeling

  • Integration of Real and Financial sectors of economy.
  • Balance-sheet  accounting approach
  • Stock-flow consistent
  • Quadruple accounting

 

From  Post-Keynesian Stock-Flow Consistent Modeling: A Survey

 

PK-SFC models are a specific kind of Post-Keynesian macro model that follows distinctive accounting rules, ensuring the consistent integration of the stocks and flows of all the sectors of the economy. The models have three important methodological innovations: first, the consistency of the overall economy is maintained, since one sector’s outflows are always another sector’s inflows just as one sector’s liability is always another sector’s asset; second, the integration of the real and the financial side of the economy; third, the construction of the long run as a chain of short run periods. Nothing is lost, neither in space nor in time. These constraints are crucial in modeling modern macroeconomies which are highly complex, integrated systems.

The roots of PK-SFC models can be identified in the work of Morris A. Copeland (1949), who, with his study on “money flows,” is the father of the flow of funds approach. His intuition was to enlarge the social accounting perspective to the study of money flows. Copeland laid the foundations for an economic approach able to integrate real and financial flows of the economy. A concrete example of his legacy is represented by the quadruple-entry system: since someone’s inflow is someone else’s outflow, the standard double-entry system of accounting is doubled in a quadruple-entry system.

Copeland’s work certainly had a great influence on economics -mainly as a source of financial data- but its potential disruptive impact on the study and modeling of the interdependences between real and financial flows failed to occur. It was only in the 1980s, with the work of Nobel Laureate James Tobin, that these efforts culminated in the organizing theory advocated by Cohen. The article Tobin wrote with co-authors (Backus et al., 1980) perhaps best represents his path-breaking contribution in the foundation of PK-SFC models. Indeed, in developing an empirical model of the US economy in both its financial and non- financial sides, Backus et al combined the theoretical hypothesis on the behavior of the economy with a rigorous accounting framework based on the flow-of-funds social account developed by Copeland. The result is a stock-flow consistent model that includes some of the characteristics still peculiar in the literature, such as the matrices-based accounting approach and discrete time and other features, such as the stock- flow identity, which are fundamental in any model of this type.

 

Next to Tobin, the other scholar who played an essential role in the development of this family of models is Wynne Godley. Godley, head of the New Cambridge school in the 1980s, started developing models coherently integrating stocks and flows. His efforts culminated in the organized framework he developed in his more recent publications, with which he collected the legacy of Tobin. Godley’s contribution probably finds its peak in the seminal book he wrote together with Marc Lavoie (Godley and Lavoie, 2007), which is still the main reference for current PK-SFC practitioners. This paper focuses on the tradition descending from the work of Wynne Godley, hence the choice of talking of PK-SFC models rather than just SFC models.

 

Key Sources of Research:

 

Bezemer, Dirk J.

“The economy as a complex system: the balance sheet dimension.”

(2012)

 

Click to access ACS_1250047_1st_Prf.pdf

 

‘No one saw this coming’ – or did they?

Dirk Bezemer

30 September 2009

http://voxeu.org/article/no-one-saw-coming-or-did-they?quicktabs_tabbed_recent_articles_block=0

 

A complex systems approach to constructing better models for managing financial markets and the economy

J. Doyne Farmer1, M. Gallegati2, C. Hommes3, A. Kirman4, P. Ormerod5, S. Cincotti6, A. Sanchez7, and D. Helbing8

 

Click to access EconFinancialFuturITC16.pdf

 

Money Creation and Financial Instability: An Agent-Based Credit Network Approach

Matthias Lengnick, Sebastian Krug, and Hans-Werner Wohltmann

 

http://www.economics-ejournal.org/economics/journalarticles/2013-32/version_1

 

Complex agent-based macroeconomics: a research agenda for a new paradigm

Domenico Delli Gatti

Edoardo Gaffeo

Mauro Gallegati

 

Click to access delligatti_gallegati.pdf

 

 

Growing fragilities? Balance sheets in The Great Moderation

Richard Barwell and Oliver Burrows

 

Click to access fs_paper10.pdf

 

 

Credit Money and Macroeconomic Instability in the Agent-based Model and Simulator Eurace

Silvano Cincotti, University of Genoa Marco Raberto, Reykjavik University Andrea Teglio, Universitat Jaume I

 

http://repositori.uji.es/xmlui/bitstream/handle/10234/32596/45464.pdf?sequence=1

 

 

The Financial Instability Hypothesis: a Stochastic Microfoundation Framework

C. Chiarella and C. Di Guilmi

 

Click to access 09e4150ef5365dded1000000.pdf

 

 

The dynamics of the monetary circuit

Steve Keen

 

http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.360.9497&rep=rep1&type=pdf

 

 

Debunking Macroeconomics

Steve Keen

 

Click to access 0c96051b9fcca21f5c000000.pdf

 

 

Causes of Financial Instability: Don’t Forget Finance

Dirk J. Bezemer

April 2011

http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.194.603&rep=rep1&type=pdf

 

 

Towards a New Monetary Paradigm: A Quantily Theorem of Disaggrcgated Credit, with Evidence from Japan

By Richard A. Werner

 

Click to access KK_97_Disaggregated_Credit.pdf

 

 

Schumpeter Might Be Right Again: The Functional Differentiation of Credit

Dirk J. Bezemer

Click to access the_functional_differentiation_of_credit.pdf

 

 

Banks As Social Accountants: Credit and Crisis Through an Accounting Lens

Dirk J Bezemer

Click to access MPRA_paper_15766.pdf

 

Bezemer, Dirk J.

“This is Not a Credit Crisis–It is a Debt Crisis.”

Economic Affairs 29.3 (2009): 95-97.

 

Godley, Wynne, and Marc Lavoie.

Monetary economics: an integrated approach to credit, money, income, production and wealth.

Springer, 2012.

 

Stock-flow Consistent Modeling through the Ages

Eugenio Caverzasi Antoine Godin

January 2013

Click to access 558f0a0108ae1e1f9bace43e.pdf

 

Fiscal Policy in a Stock-Flow Consistent (SFC) Model

Wynne Godley and Marc Lavoie

April 2007

Click to access wp_494.pdf

 

Copeland, Morris A.

“Social accounting for moneyflows.” 

The Accounting Review 24.3 (1949): 254-264.

 

Finance and economic breakdown: modeling Minsky’s “financial instability hypothesis”

 

Steeve Keen

Click to access Keen1995FinanceEconomicBreakdown_JPKE_OCRed.pdf

 

The Credit Crisis and Recession as a Paradigm Test

Dirk J. Bezemer

Click to access JEI_PARADIGM_PAPER.pdf

 

Keen, Steve.

“A monetary Minsky model of the Great Moderation and the Great Recession.”

Journal of Economic Behavior & Organization 86 (2013): 221-235.

Click to access JEBO_2672.pdf

 

 

“No One Saw This Coming”
Understanding Financial Crisis Through Accounting Models

Dirk J Bezemer

 

Click to access Study-Bezemer-No-one-saw-this-coming.pdf

 

 

Understanding financial crisis through accounting models

Dirk J. Bezemer

Click to access 00b4952ce88deab0d2000000.pdf

 

Can Disequilibrium Macroeconomic Models Be Used to Anticipate Financial Instability?

A Case Study

Dirk J. Bezemer

Click to access Can_Macro_Models_JEvoLEcon_1.pdf

 

A dynamic monetary multi-sectoral model of production

Steve Keen, University of Western Sydney

Click to access Keen2011DynamicMonetaryMultisectoralModel.pdf

 

Circuit Theory Extended: The Role of Speculation in Crises

Neil Lancastle

https://www.dora.dmu.ac.uk/bitstream/handle/2086/11640/economics_2012-34.pdf?sequence=1&isAllowed=y

 

Debt cycles, instability and fiscal rules: a Godley-Minsky model

Yannis Dafermos

 

Click to access Dafermos%20(2015)%20Debt%20cycles%20instability%20and%20fiscal%20rules.pdf

 

The post-Keynesian economics of credit and debt

Marc Lavoie

Click to access inet2012lavoie_post-keynesianeconomics.pdf

 

Assessing the Contribution of Hyman Minsky’s Perspective to Our Understanding of Economic Instability

Hersh Shefrin

 

Click to access Shefrin%20Assessing%20Minsky%20Jan%2013%202013.pdf

 

Modeling Financial Instability

Steve Keen

 

Click to access Keen2014ModelingFinancialInstability.pdf

 

 

Post-Keynesian Stock-Flow Consistent Modeling: A Survey

Eugenio Caverzasi and Antoine Godin

 

Click to access february_2015_-_kbs_research_bulletin_pdf.pdf

 

Godley and Graziani: Stock-Flow-Consistent Monetary Circuits

Gennaro Zezza

April 2011

 

Click to access 65034-Zezza%20-%20Godley%20and%20Graziani.%20Stock-Flow-Consistent%20Monetary%20Circuits.pdf

 

Features of a realistic banking system within a post-Keynesian stock-flow consistent model

Marc Lavoie,

Wynne Godley,

December 2003

 

Click to access 1321739.pdf

 

Words to the Wise: Stock Flow Consistent Modeling of Financial Instability

Stephen Kinsella

November 2011

Click to access 6228912.pdf

 

The Minskyan System, Part III:
System Dynamics Modeling of a Stock Flow–Consistent Minskyan Model

Eric Tymoigne

June 2006

Click to access wp_455.pdf

 

TOWARDS A RECONSTRUCTION OF MACROECONOMICS USING A STOCK FLOW CONSISTENT (SFC) MODEL

Wynne Godley

May 2004

 

https://www.repository.cam.ac.uk/bitstream/handle/1810/225167/wp16.pdf?sequence=1&isAllowed=y

 

A foxy hedgehog: Wynne Godley and macroeconomic modelling

Lance Taylor

 

Click to access ramanan-20100615T083857-gsl2drg.pdf

 

 

Some Simple, Consistent Models of the Monetary Circuit

Gennaro Zezza,

May 2004

 

Click to access 9314338.pdf

 

Money and Macroeconomic Dynamics : Accounting System Dynamics Approach

Edition 2.0

Kaoru Yamaguchi Ph.D.

 

Click to access Macro%20Dynamics.pdf

 

Money Creation under Full-reserve Banking: A Stock-flow Consistent Model

Patrizio Lainà

October 2015

Click to access wp_851.pdf

 

Endogenous Feedback Perspective on Money in a Stock-Flow Consistent Model

Working Paper (May 5, 2016)

I. David Wheat

Click to access Wheat%20Endogenous%20Feedback%20Perspective%20on%20Money%20WP.pdf

 

 

Modeling the Economy as a Whole – Stock-Flow Models
Gennaro Zezza

 

Click to access memf2015-Chapter25-Gennaro.pdf

 

 

FINANCIALIZATION AND THE MONETARY CIRCUIT: A MACRO-ACCOUNTING APPROACH

MARCO PASSARELLA

 

Click to access MVP%20ROPE%202014.pdf