Stock-flow consistent macroeconomic modeling and Post-Keynesian Institutionalism

Abstract

The object of this chapter is to show in what sense it can be claimed that stock-flow consistent (SFC) modeling is part of Post-Keynesian Institutionalism. SFC models are usually considered part of the Kaldorian branch of Post Keynesian economics, since they are mostly derived from the works of Wynne Godley, which had many affinities with those of Nicholas Kaldor on money, macroeconomics, and international trade. The SFC approach uses flow-of-funds analysis, and as such it also has a strong connection with Post Keynesian Institutionalists and with original Institutionalism. An important feature of SFC modeling is the consideration of balance-sheet matrices and transaction-flow matrices. It will be argued, through various examples, that these matrices are closely associated with the description and assigned role of the various institutions and agents present in an economy, and that different models take institutions into account in different ways.