Reforming the Eurozone financial system: A system-dynamics approach

N.D. van Egmond and B.J.M. de Vries

International Review of Financial Analysis, 2024, vol. 93, issue C

Abstract: The effectiveness of the current monetary policy of the European Central Bank (ECB) in maintaining (price) stability in the eurozone is assessed using a system dynamic model. The model combines a neoclassical growth model with a stock-flow representation of the eurozone financial sector at a high level of aggregation. With endogenous money creation, the multidirectional relationship between asset prices and net income, and also the dual causality of both liquidity and investment relative to interest rates as the main features of the model, the developments of the past 50 years can be understood and extrapolated to 2050.

Keywords: Stock-flow dynamic model; Quantitative easing; Interest rate policy; Central Bank Digital Currency; Price-stability (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:93:y:2024:i:c:s1057521924001248

DOI: 10.1016/j.irfa.2024.103192

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