Stock-Flow Consistent Model with Repayment of Bank Loans Used to Finance Past Investments

Edouard Cottin-Euziol and Nicolas Piluso ()

Review of Political Economy, 2023, vol. 35, issue 2, 454-475

Abstract: Stock-flow consistent modelling (SFC) is currently one of the most active fields of research in post-Keynesian macroeconomics. SFC models make it possible to study the dynamics of a monetary economy of production within a consistent accounting framework. However, with some rare exceptions, SFC models do not take into account the repayment of bank loans used to finance business investments. It is assumed that these investments are financed by perpetual loans or by constant turnover. In this article, we reject this assumption and build a model based on recent studies, in which firms repay part of their past debt in each period. We then study the dynamics of this model. The results obtained indicate that the dynamics of an SFC model is significantly affected by taking these repayments into account.

Date: 2023
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DOI: 10.1080/09538259.2021.1947659

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