A New, Simple SFC Open Economy Framework

Research output: Contribution to journalArticlepeer-review

Abstract

The paper presents a simple Stock-Flow Consistent open economy model with flexible exchange rates. It can reproduce the same dynamics and results of the flexible exchange rates ‘benchmark’ model by Godley and Lavoie [2007b. Monetary Economics: An Integrated Approach to Credit, Money, Income, Production and Wealth. London, UK: Palgrave MacMillan]. The latter is considered the ‘centre of gravity’ of SFC open economy literature. Yet the new model uses only one-third of the equations of the original one and features a different mechanism of determination of the exchange rate. Its small size and its flexibility make the model suitable both for didactic purposes and for extensions with further building blocks to address a variety of research topics.
Original languageEnglish
Pages (from-to)1-30
Number of pages30
JournalReview of Political Economy
Early online date19 Apr 2021
DOIs
Publication statusE-pub ahead of print - 19 Apr 2021

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