This year’s International Monetary Economics spent a considerable amount of time explaining the basics of stock-flow consistent macroeconomic modeling. You were exposed to several canonical models early on (for example, [2]), with a view
to explaining the methodology of SFC modeling rather than the attributes of one model over another particularly.
In the course’s early phase, we saw three things.
First, the SFC modeling paradigm can easily replicate orthodox models. For example, SIM can be modified to incorporate the IS-LM framework.
Second, the SFC way of understanding macroeconomics has a significant advantage over orthodox New-Classical or New-Keynesian models in requiring stock flow consistency throughout each stage of model building. This stricture opens the model up to a more complicated structure, but has the advantage of a more realistic examination of macroeconomic phenomena.
Third, we saw how SFC models can be adapted to help understand the policy problems of the day, in particular the credit crunch and potential stagflation underway in the US economy.
We then dove straight into [1], looking at SIM, SIMEX, PC, PCEX, REG, REGEX, OPEN, and OPENEX, respectively. We covered material from chapters 1-7 in Godley and Lavoie in graduate-level detail.
On your blogs and in class, you solved several models and wrote up interesting commentaries of the current macroeconomic situation, as well as performing some simulations from Genarro Zezza’s work.
Finally, you worked in detail on an SFC paper from the literature, presenting the paper to your peers in the last few weeks.
My objectives when constructing this course were that students would be able to understand, solve, and manipulate simple stock flow consistent models, and apply them to aspects of the modern macroeconomy. If you feel you have come some way
towards this goal, then the course was a success.
2. Stuff to know for the exam
There are three main areas to revise for the exam:
(1) Each of the G&L chapters. Be able to solve SIM, SIMEX, PC and PCEX by hand, be able to understand and interpret simulations using the more complicated models.
(2) Your blogworks. Read over them and redo any you felt weren’t up to scratch.
(3) The reading pack. I’m not expecting you to know the whole thing cover to cover, but there will be questions designed to test your understanding of these readings.
Finally, the exam will be of the same format as last year’s exam, available on the blog.
Expect to need a calculator, pencils, and to draw diagrams.