EconPapers    
Economics at your fingertips  
 

Tobin lives: integrating evolving credit market architecture into flow of funds based macro-models

John Duca and John Muellbauer ()

No 1307, Working Papers from Federal Reserve Bank of Dallas

Abstract: After the global financial crisis, there is greater awareness of the need to understand the interactions between the financial sector and the real economy and hence the potential for financial instability. Data from the financial flow of funds, previously relatively neglected, are now seen as crucial to the data monitoring carried out by central banks. This paper revisits earlier efforts to understand financial-real linkages, such those of Tobin and the Yale School, and proposes a modeling framework for analysing the household flow of funds jointly with consumption. The consumption function incorporates household income, portfolios of assets and debt held at the end of the previous period, credit availability, and asset prices and interest rates. In a general equilibrium setting, these all have to be endogenised and since households make consumption and housing purchase decisions jointly with portfolio decisions, there is much to be gained in modeling a household sub-system of equations. Major evolutionary structural change – namely the evolving credit architecture facing households – is handled by our ‘Latent Interactive Variable Equation System’. A by-product is improved understanding of the secular decline in US saving rate, as well as of the household financial accelerator. Moreover, the models discussed in this paper offer new ways of interpreting data on credit, money and asset prices, which are crucial for central banks.

Keywords: Financial crises; Consumption (Economics); Credit control; Households - Finance (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban and nep-mac
Date: 2013
Note: Published as: Duca, John and John Muellbauer (2014), "Tobin LIVES: Integrating Evolving Credit Market Architecture into Flow of Funds Based Macro-models," in A Flow of Funds Perspective on the Financial Crisis, Volume II: Macroeconomic Imbalances and Risks to Financial Stability, ed. Bernard Winkler, Ad van Riet and Peter Bull (New York: Palgrave MacMillian), 11-39.
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6) Track citations by RSS feed

Downloads: (external link)
http://www.dallasfed.org/assets/documents/research/papers/2013/wp1307.pdf (application/pdf)

Related works:
Working Paper: Tobin LIVES: Integrating evolving credit market architecture into flow of funds based macro-models (2013) Downloads
Working Paper: Tobin Lives: Integrating evolving credit market architecture into flow of funds based macro-models (2012) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:feddwp:1307

Ordering information: This working paper can be ordered from

DOI: 10.24149/wp1307

Access Statistics for this paper

More papers in Working Papers from Federal Reserve Bank of Dallas Contact information at EDIRC.
Bibliographic data for series maintained by Amy Chapman ().

 
Page updated 2019-08-15
Handle: RePEc:fip:feddwp:1307