A New, Simple SFC Open Economy Framework

Carnevali, Emilio (2022) A New, Simple SFC Open Economy Framework. Review of Political Economy, 34 (3). pp. 504-533. ISSN 0953-8259

OPENSIMEmodel_Mar2021_final_approvedbyRochon.pdf - Accepted Version

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Official URL: https://doi.org/10.1080/09538259.2021.1899518


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.

Item Type: Article
Uncontrolled Keywords: Two-country model, balance of payments, exchange rates
Subjects: N300 Finance
Department: Faculties > Business and Law > Newcastle Business School > Accounting and Finance
Depositing User: Rachel Branson
Date Deposited: 04 May 2021 11:29
Last Modified: 19 Oct 2022 03:31
URI: https://nrl.northumbria.ac.uk/id/eprint/46077

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