On stock-flow consistent approaches and the like: the ‘rediscovery’ of model building

Duccio Cavalieri

MPRA Paper from University Library of Munich, Germany

Abstract: This paper on the theoretical foundations of macroeconomic modelling pursues a need of conceptual clarification of a debated methodological problem concerning monetary and fiscal policies. In the first part of the paper the key features of Stock-Flow Consistent Approaches and Modern Monetary Theory are examined, in a critical perspective. These schools of thought consider the interaction between real and monetary factor at an aggregate level and re-propose with minor changes a well known system dynamics methodology, without implementing it and without even mentioning it. They rely on unrealistic and oversimplifying assumptions. Monetary circuit theories are also criticized. In the second part of the essay the guidelines of an alternative theoretical perspective are presented and their policy implications are discussed. Monetary and fiscal policy are not mutually independent. A reasoned choice of policy-mix is suggested.

Keywords: money; SFCA; MMT; MCT; New Consensus; monetary and fiscal policy; New Consensus; monetary and fiscal policy (search for similar items in EconPapers)
JEL-codes: B22 B41 E10 E4 E40 E42 (search for similar items in EconPapers)
Date: 2015-09, Revised 2015-10-02
New Economics Papers: this item is included in nep-mac and nep-mon
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