Table Of ContentContributions in Stock-flow Modeling
Also by the editors:
The Elgar Companion to Hyman Minsky, edited by Dimitri B. Papadimitriou and
L. Randall Wray
Hyman P. Minsky’s John Maynard Keynes, edited by Dimitri B. Papadimitriou and
L. Randall Wray
Hyman P. Minsky’s Stabilizing an Unstable Economy, edited by Dimitri B.
Papadimitriou and L. Randall Wray
Government Spending on the Elderly, edited by Dimitri B. Papadimitriou
Distributional Effects of Government Spending and Taxation, edited by Dimitri B.
Papadimitriou
Hyman P. Minsky’s Induced Investment and Business Cycles, edited by Dimitri B.
Papadimitriou
Modernizing Financial Systems, edited by Dimitri B. Papadimitriou
Advances in Monetary Policy and Macroeconomics, edited by Philip Arestis and
Gennaro Zezza (Palgrave Macmillan 2007)
The Stock-Flow Consistent Approach: Selected Writings of Wynne Godley, edited by
Marc Lavoie and Gennaro Zezza (Palgrave Macmillan 2012)
Contributions in
Stock-flow Modeling
Essays in Honor of Wynne Godley
Edited by
Dimitri B. Papadimitriou
Levy Economics Institute of Bard College, US
and
Gennaro Zezza
Levy Economics Institute of Bard College, US, and University of Cassino, Italy
Editorial and Selection Matter © Dimitri B. Papadimitriou and
Gennaro Zezza 2012
Individual chapters © Contributors
Softcover reprint of the hardcover 1st edition 2012 978-0-230-29445-5
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Contents
List of Tables vii
List of Figures x
List of Abbreviations and Acronyms xiv
Levy Economics Institute of Bard College xvi
Acknowledgements xvii
Notes on Contributors xviii
1 Wynne Godley’s Economics 1
Dimitri B. Papadimitriou
2 Godley Moves in Mysterious Ways: The Craft of Economic
Judgment in Post-war Britain 12
Tiago Mata
3 Godley Got It Right 36
L. Randall Wray
4 Who Are These Economists, Anyway? 63
James K. Galbraith
5 A New Look at New Cambridge: Will the UK Private
Expenditure Function Stand Up? 76
Bill Martin
6 Three Balances and Twin Deficits: Godley versus Ruggles and
Ruggles 125
Anwar Shaikh
7 From Macroeconomics to Monetary Economics: Some
Persistent Themes in the Theory Work of Wynne Godley 137
Marc Lavoie
8 Godley and Graziani: Stock-flow Consistent Monetary
Circuits 154
Gennaro Zezza
9 The Stock-flow Consistent Approach with Active
Financial Markets 173
Jo Michell and Jan Toporowski
v
vi Contents
10 Financial Integration and Stabilization in a Monetary Union
Without or With Bank Rationing 197
Vincent Duwicquet and Jacques Mazier
11 Debt-deflation Traps Within Small Open Economies:
A Stock-flow Consistent Perspective 235
Stephen Kinsella and Saed Khalil
12 A Debate with Wynne Godley on the Neutrality of
Fiscal Policy 266
Edwin Le Heron
13 The Effectiveness of Fiscal Policy in the Levy Institute’s
Stock-flow Model 300
Philip Arestis and Malcolm Sawyer
14 Of Unsustainable Processes and the US Dollar 321
Jörg Bibow
15 Squaring the Circle in Euro Land? Some Remarks on the
Stability Programmes 2010–13 349
Michael Brecht, Silke Tober, Till van Treeck and Achim Truger
Wynne Godley – A Bibliography 377
Index 388
List of Tables
5.1 U nivariate stationarity tests – annual data to 2007 85
5.2 U nivariate stationarity tests – quarterly data to 2007 86
5.3 F inancial surplus period means and standard deviations 87
5.4 F inancial surpluses – mean and variance equality tests 88
5.5 M arket sector financial wealth, ratio to disposable
income 92
5.6 F inancial wealth ratio stationarity tests 92
5.7 M arket sector wealth, ratio to disposable income 94
5.8 T otal and non-financial wealth ratios stationarity tests 95
5.9 C ointegration summary results – Johansen method 97
5.10 E stimation results using inflation-tax adjusted disposable
income 101
5.11 E stimation results using conventional measure of
disposable income 102
5.12 H ypothetical steady state solutions 105
5.13 Proximate impact of house price variations 106
5.A.1 Stationarity tests – latest data versus 1997 Blue
Book data 109
5.B.1 I ntegration tests of market sector regression variables 111
5.B.2 H ypothesis tests on ΔE error correction model 112
5.B.3 N on-nested tests for alternative income definitions 112
5.B.4 N on-nested tests for linear versus log-linear models 112
8.1 M oney holdings at different stages of the financial cycle 161
8.2 S ocial accounting matrix – Model 1: The simplest
monetary circuit 162
8.3 F low of funds for Model 1 163
8.4 S ocial accounting matrix two sector Model 2: A two
sectors model 166
8.5 F low of funds for Model 2 167
vii
viii List of Tables
9.1 ‘ Classical’ case: investment funded by bank loans – no
profits in firm sector 175
9.2 Retained earnings – not all receipts ‘recycled’ through
the banking sector 179
9.3 Simple overcapitalization: excess capital held in the
form of deposits 181
9.4 Speculative overcapitalization: firms hold excess capital
as financial securities 187
9.5 Sectoral balance sheet: saving in household sector,
equity initially bought by households 191
9.6 Sectoral balance sheet: saving in household sector,
equity initially bought by firms 192
9.7 Sectoral balance sheet: saving in firm sector, equity
initially bought by firms 192
10.1 Balance sheet 201
10.2 Adjustments in a monetary union: the different
configurations 213
10.3 Stabilization coefficients after a loss of competitiveness
without credit rationing (shock in t=10) 216
10.4 Stabilization coefficients after a decrease of the rate of
accumulation and a decrease of equities’ prices in the
rest of the union (country S) 217
10.5 Stabilization coefficients after a loss of country N
competitiveness with global credit rationing 219
10.6 Stabilization coefficients after a loss of competitiveness
in country N with credit rationing by domestic banks 223
10.7 Stabilization coefficients in case of credit rationing by
country S banks 224
10.8 Stabilization coefficients after a loss of competitiveness
with or without Treasury bills rationing 227
10.9 Stabilization coefficients in case of a loss of country
N competitiveness with variable interest rates 229
10.A.1 T ransaction matrix 231
10.A.2 Main parameters for calibration 233
11.1 Balance sheets matrix 242
11.2 Transactions flows matrix 243
List of Tables ix
13.1 Flow matrix 305
13.2 Dynamic multipliers 311
15.1 Financial balances, euro area countries, 2007 359
15.2 Financial balances, euro area countries, 2009 360
15.3 Projections of the Stability Programmes, 2010–13 362
15.4 Financial balances, euro area countries, 2013,
according to the Stability Programmes 364
15.5 Financial balances, euro area countries, 2013, given
surplus countries realize their plans but euro area as a
whole fails to improve the current account 369
15.6 Financial balances, euro area countries, 2013, given
more significant rebalancing within the euro area 370
