Monday, 8 February 2016

Derivation of my DBCF model in a Stock-Flow Consistent Framework

After some very helpful comments from Jan Kregel at the Levy Institute, I have derived my DBCF model of the economy from first principles using a stock-flow consistent framework. This adds more rigour as well as giving more clarification of detail of implementation.

I feel that this model describes the real world far better than existing mainstream academic models for a number of reasons:

1) It makes no assumptions about behaviour, or rationality, of participants.

2) It can explain inflation and economic growth in a way that all loanable funds models used by mainstream macroeconomists are unable to.

3) It includes a balance sheet, the current bloatedness of which explains both economic stagnation and the zero interest rate environment.

4) It shows clear solutions to our current problems, by targeting money to increase demand.

5) It does not back up the neo-liberal consensus which has both failed economically and led to widening inequality, greater rewards for rent seekers and a diminishing share of returns for those doing the work in the economy.

The derivation of the model is here:

Deriving the DBCF model in a Stock-Flow Consistent Framework

And the full paper is here, with empirical data to support it:

The Relationship Between High Debt Levels and Economic Stagnation, Explained by a Simple Cash Flow Model of the Economy

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