Financial integration and macroeconomic adjustments in a monetary union

Duwicquet, Vincent; Mazier, Jacques

doi:10.2753/pke0160-3477330207

Cited by 29 publications

(21 citation statements)

References 13 publications

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“…They use this analysis to criticise the Maastricht Treaty and the successive Stability and Growth Pact. Duwicquet and Mazier (2010) analyse the stabilisation effects of foreign asset holding and intrazone credit using a two-country model with one shared currency model. They conclude that a foreign asset model might mitigate asymmetric shocks, but only with a smaller effect than usually accounted, while foreign loans have no effect whatsoever.…”

Section: Open Economiesmentioning

confidence: 99%

Post-Keynesian stock-flow-consistent modelling: a survey

Caverzasi

Godin

2014

Cambridge Journal of Economics

132

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The aim of the paper is to provide an overview of the current stock-flow-consistent (SFC) literature. Indeed, we feel the SFC approach has recently led to a blossoming literature, requiring a new summary after the work of Dos Santos and above all after the publication of the main reference work on the methodology, Godley and Lavoie's Monetary Economics: An Integrated Approach to Credit, Money, Income, Production and Wealth. The paper is developed along the following lines. First, a brief historical analysis investigates the roots of this class of models that can be traced as far back as 1949 and the work of Copeland. Second, the competing points of view regarding some of its main controversial aspects are underlined and used to classify the different methodological approaches followed in using these models. Namely, we discuss (i) how the models are solved, (ii) the treatment of time and its implication and (ii) the need (or not) for microfoundations. These results are then used in the third section of the paper to develop a bifocal perspective, which allows us to divide the literature reviewed according to both its subject and the methodology. We explore various topics such as financialisation, exchange rate modelling, policy implication, the need for a common framework within the post-Keynesian literature and the empirical use of SFC models. Finally, the conclusions present some hypotheses (and wishes) for the possible lines of development of SFC models.

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Section: Open Economiesmentioning

confidence: 99%

Post-Keynesian stock-flow-consistent modelling: a survey

Caverzasi

Godin

2014

Cambridge Journal of Economics

132

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“…In a properly calibrated model, Duwicquet and Mazier (2010) examine the usual argument that financial integration can help make a currency union an optimum currency area. In particular, they examine the stabilization effects of holding foreign assets and intrazone credits.…”

Section: Modeling the Open Economymentioning

confidence: 99%

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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“…Second, it contributes to the SFC literature, particularly to its open economy SFC branch. Some of the most recent and relevant works here include Duwicquet and Mazier (), Duwicquet, Mazier, and Saadaoui (), Mazier and Tiou‐Tagba Aliti (), Greenwood‐Nimmo (), Bortz (), Khalil and Kinsella () and Mazier and Valdecantos (). Most notably, while various authors have concentrated on issues that relate to the activity and channels of influence of CRAs, such as sovereign debt creditworthiness (Bortz, ) and endogenous shifts in liquidity preference (Dafermos, ), and several others have focused on the dynamics of the Eurozone (e.g., Duwicquet, Mazier, & Saadaoui, ; Godley & Lavoie, ; Mazier & Valdecantos, ), no attempt has been made so far to explicitly incorporate sovereign ratings into an SFC model.…”

Section: Introductionmentioning

confidence: 99%

Sovereign ratings, macroeconomic dynamics, and fiscal policy. Interactions within a stock flow consistent framework

Ioannou

2017

Metroeconomica

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Operating in the context of deregulated financial markets, credit rating agencies do not only 'provide an opinion', but also affect macroeconomic dynamics. By utilizing a twocountry stock flow consistent model that provides a representation of the Eurozone, the paper connects the movements of sovereign ratings with the dynamics of the financial market and the constraints on fiscal policy. With endogenous fiscal expenditure and an endogenous credit rating mechanism the model shows how following a recessionary shock, a rating downgrade can influence the financial constraints that surround a government, pushing it toward fiscal austerity and thereby deepening the already ongoing recession. | IN TRO DUCT IO NCredit rating agencies (CRAs) have long been recognized as an important driver of financial and macroeconomic dynamics.1 Since the outbreak of the East Asian crisis, authors such as Ferri, Liu, and Stiglitz (1999) have pointed out their role in over-downgrading crisis-hit countries, and re-enforcing recessionary spirals. More recently, researchers such as Arezki, Candelon, andSy (2011) andDe Santis (2012) have provided evidence as to how European sovereign ratings have a significant impact upon interest rates, while Gande and Parsley (2004b) and Kim and Wu (2008) have provided evidence on the link between sovereign ratings and international capital flow movements. More critical authors have pointed out the role of CRAs as the 'gatekeepers' of the financial market and have highlighted the political dimensions of their power in prescribing the 'right' sets of policies (see for instance Kundu, 2001;Sinclair, 1993Sinclair, , 2005. Through their sovereign rating instruments, CRAs have facilitated the promotion of fiscal austerity and have actively encouraged market-friendly policies, such as privatizations, in 1 Despite the numerous registered agencies across the globe, it is three of them that dominate the market, namely Standard and Poor's (S&P), Moody's and Fitch. Nonetheless, the effects of sovereign ratings on economic outcomes have not been investigated to date in a macroeconomic model. This is done here by means of a two-country stock flow consistent (SFC) model. Originating from the seminal contributions of Godley and Lavoie (see Godley, 1999;Godley & Lavoie, 2007a, 2007b, SFC modeling has emerged as a lively stream of research in recent years. With the principle of double-entry bookkeeping at its core, SFC modeling offers a framework that allows the real and monetary sides of the economy to interact with each other in a genuine way. Money and credit are allowed to have real effects in both the short and the long run, and the financial sector is allowed to embody an institutionally specific content (for a recent article over the advantages of SFC modeling see Michell, 2016; for an up to date literature survey see Caverzasi & Godin, 2015).The aim of our model is to elucidate the links between movements in sovereign ratings, the financial market and the constraints that are placed on fiscal policy withi...

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Financial integration and macroeconomic adjustments in a monetary union

Cited by 29 publications

References 13 publications

Post-Keynesian stock-flow-consistent modelling: a survey

Post-Keynesian stock-flow-consistent modelling: a survey

Stock‐Flow Consistent Macroeconomic Models: A Survey

Sovereign ratings, macroeconomic dynamics, and fiscal policy. Interactions within a stock flow consistent framework

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