Three Essays On Open Economy Stock Flow Consistent Models

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 controlled by "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.

This first volume in a three-volume exposition of Shubik's vision of "mathematical institutional economics" explores a one-period approach to economic exchange with money, debt, and bankruptcy. This is the first volume in a three-volume exposition of Martin Shubik's vision of "mathematical institutional economics"--a term he coined in 1959 to describe the theoretical underpinnings needed for the construction of an economic dynamics. The goal is to develop a process-oriented theory of money and financial institutions that reconciles micro- and macroeconomics, using as a prime tool the theory of games in strategic and extensive form. The approach involves a search for minimal financial institutions that appear as a logical, technological, and institutional necessity, as part of the "rules of the game." Money and financial institutions are assumed to be the basic elements of the network that transmits the sociopolitical imperatives to the economy. Volume 1 deals with a one-period approach to economic exchange with money, debt, and bankruptcy. Volume 2 explores the new economic features that arise when we consider multi-period finite and infinite horizon economies. Volume 3 will consider the specific role of financial institutions and government, and formulate the economic financial control problem linking micro- and macroeconomics.

Selected essays from the eminent economist, Wynne Godley, tracing the development of his work and illuminating the key theories and models that made his name. Essays focus not only on the stock-flow coherent approach, but also lay out Godley's views about the European Union and the stability of its monetary policy.

A collection of papers from leading thinkers to celebrate the work of the late Wynne Godley, and his enormous contribution to the field of monetary economics. Chapters include in-depth discussions of the revolutionary economic modelling systems that Godley introduced, as well as his prescient concerns about the global financial crash.

Offering a unique picture of recent developments in a range of non-conventional theoretical approaches in economics, this book introduces readers to the study of Analytical Political Economy and the changes within the subject. Includes a wide range of topics and theoretical approaches that are critically and thoroughly reviewed Contributions within the book are written according to the highest standards of rigor and clarity that characterize academic work Provides comprehensive and well-organized surveys of cutting-edge empirical and theoretical work covering an exceptionally wide range of areas and fields Topics include macroeconomic theories of growth and distribution; agent-based and stock-flow consistent models; financialization and Marxian price and value theory Investigates exploitation theory; trade theory; the role of expectations and ‘animal spirits’ on macroeconomic performance as well as empirical research in Marxian economics

Offering a unique picture of recent developments in a range of non-conventional theoretical approaches in economics, this book introduces readers to the study of Analytical Political Economy and the changes within the subject. Includes a wide range of topics and theoretical approaches that are critically and thoroughly reviewed Contributions within the book are written according to the highest standards of rigor and clarity that characterize academic work Provides comprehensive and well-organized surveys of cutting-edge empirical and theoretical work covering an exceptionally wide range of areas and fields Topics include macroeconomic theories of growth and distribution; agent-based and stock-flow consistent models; financialization and Marxian price and value theory Investigates exploitation theory; trade theory; the role of expectations and ‘animal spirits’ on macroeconomic performance as well as empirical research in Marxian economics

In the second chapter, Elia Sartori and I present a wage posting model with search frictions where idiosyncratic shocks to optimal firm size generate different returns to adjusting the workforce. Our approach takes the firms as the only decision makers, and it assumes a simple employment contract: firms pay a wage and may only change an employment relationship by paying exogenously specified costs. Labor market outcomes are modeled as a mean field game equilibrium in which aggregate statistics impacting firms' policies, which play the role of prices, are the hiring and poaching flow rates. Consistency of aggregate choices with prices builds on a reduced form matching function which subsumes the entire functioning of the labor market outside of firms. Leveraging and extending recently developed numerical methods, we can solve for the equilibrium. The model delivers nontrivial policy functions and aggregates, which can be used to quantify features of the endogenous reshuffling of workers both in the size ladder and in the wage ladder, including net poaching along these two margins, as presented in, e.g., Haltiwanger et al. (2017). A calibrated version of the model is able to generate an inverted net poaching schedule which is consistent with their finding that smaller firms poach workers from larger ones.