Debt Cycles, Instability and Fiscal Rules: A Godley-Minsky Model

Dafermos, Yannis

doi:10.2139/ssrn.2658255

Cited by 8 publications

(13 citation statements)

References 46 publications

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“…Minsky advocated a big government to stabilise unstable economies (Minsky, 1986;Minsky 1992). Indeed, other studies on similar models have shown that countercyclical government spending can enhance stability (Dafermos, 2017;Costa Lima et al, 2014). The model does not incorporate a financial sector, nor households taking up firm equity, or corporate bonds.…”

Section: Discussionmentioning

confidence: 95%

“…This section describes the model and its assumptions in detail. As mentioned in the Introduction, most of the pieces of the model are taken from that of Keen (1995), but the debt dynamics are inspired by the recent model of Dafermos (2017). The notation and presentation are drawn from Grasselli and Costa Lima (2012).…”

Section: The Modelmentioning

confidence: 99%

“…Considering now the debt dynamics, following Dafermos (2017), the rate of change of debt is taken to be proportional to the difference between the target debt and the current debt. The equation for this, expressed in terms of normalised debt d =: D/Y iṡ…”

Section: The Modelmentioning

confidence: 99%

“…beyond the indirect dependence due merely to profit itself depending on debt). Thus, rather than employing the Keen (1995) model in its original form, the investment dynamics here have terms added from a recent model of Dafermos (2017) to include an explicit direct dependence on growth and debt. 1 With output determined by the investment dynamics, consumption will be the accommodating, or residual, variable in the model.…”

Section: Introductionmentioning

confidence: 99%

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Stability of Zero-growth Economics Analysed with a Minskyan Model

Barrett

2018

Ecological Economics

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As humanity is becoming increasingly confronted by Earth's finite biophysical limits, there is increasing interest in questions about the stability and equitability of a zero-growth capitalist economy, most notably: if one maintains a positive interest rate for loans, can a zero-growth economy be stable? This question has been explored on a few different macroeconomic models, and both 'yes' and 'no' answers have been obtained. However, economies can become unstable whether or not there is ongoing underlying growth in productivity with which to sustain growth in output. Here we attempt, for the first time, to assess via a model the relative stability of growth versus no-growth scenarios. The model employed draws from Keen's model of the Minsky financial instability hypothesis. The analysis focuses on dynamics as opposed to equilibrium, and scenarios of growth and no-growth of output (GDP) are obtained by tweaking a productivity growth input parameter. We confirm that, with or without growth, there can be both stable and unstable scenarios. To maintain stability, firms must not change their debt levels or target debt levels too quickly. Further, according to the model, the wages share is higher for zero-growth scenarios, although there are more frequent substantial drops in employment.

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Section: Discussionmentioning

confidence: 95%

Section: The Modelmentioning

confidence: 99%

Section: The Modelmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Stability of Zero-growth Economics Analysed with a Minskyan Model

Barrett

2018

Ecological Economics

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“…Well before the recession, Dos Santos () noted that the attempts at formalizing Minsky's ‘financial instability hypothesis’ were lacking a common ground, while the SFC approach could provide a framework where many of Minsky's insights, such as the interrelation among balance sheets, could be better dealt with. Later contributions, such as Dos Santos and Macedo e Silva (), tried to show how SFC models could provide a starting point for a dynamic analysis of a business cycle with Minskyan features, a result that is achieved with a model of greater complexity by Dafermos (), who combines Godley's New Cambridge approach with some Minskyan assumptions. In his model, private expenditure is driven by a target net‐assets‐to‐income ratio, but such a target ratio – following Minsky – changes over the cycle as a result of changes in expectations and the conventions of borrowers and lenders.…”

Section: Extensions: Finance the Monetary Circuit And Income Distribmentioning

confidence: 99%

Stock‐flow Consistent Macroeconomic Models: A Survey

Nikiforos

Zezza

2017

Journal of Economic Surveys

107

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in May 2017The 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. extended to address issues such as financialization and income distribution. We next discuss the implications of the approach for models of open economies and compare the methodologies adopted in developing SFC empirical models for whole countries. We review the contributions where the SFC approach is being adopted as the macroeconomic closure of microeconomic agent-based models, and how the SFC approach is at the core of new research in ecological macroeconomics. Finally, we discuss the appropriateness of the name "stock-flow consistent" for the class of models we survey.

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Stock‐Flow Consistent Macroeconomic Models: A Survey

Nikiforos

Zezza

2018

Analytical Political Economy

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The stock-flow consistent (SFC) modeling approach, grounded in the pioneering work of Wynne Godley and James Tobin in the 1970s, has been adopted by a growing number of researchers in macroeconomics, especially after the publication of Godley and Lavoie (2007), which provided a general framework for the analysis of whole economic systems, and the recognition that macroeconomic models integrating real markets with flow-of-funds analysis had been particularly successful in predicting the Great Recession of 2007-9. We introduce the general features of the SFC approach for a closed economy, showing how the core model has been extended to address issues such as financialization and income distribution. We next discuss the implications of the approach for models of open economies and compare the methodologies adopted in developing SFC empirical models for whole countries. We review the contributions where the SFC approach is being adopted as the macroeconomic closure of microeconomic agent-based models, and how the SFC approach is at the core of new research in ecological macroeconomics. Finally, we discuss the appropriateness of the name "stock-flow consistent" for the class of models we survey.

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Debt Cycles, Instability and Fiscal Rules: A Godley-Minsky Model

Cited by 8 publications

References 46 publications

Stability of Zero-growth Economics Analysed with a Minskyan Model

Stability of Zero-growth Economics Analysed with a Minskyan Model

Stock‐flow Consistent Macroeconomic Models: A Survey

Stock‐Flow Consistent Macroeconomic Models: A Survey

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