A fiscal policy model (under construction)

This page contains some resources related to a fiscal policy model that is mentioned from time to time in my blog. This page focuses on resources related to the model itself–what it is, what we hope to accomplish in our work on it, and more.  The page remains under construction, with more to be added in the near future.

I. Resources and links related to:

Hannsgen, G. 2014. “Fiscal Policy, Chartal Money, Markup Dynamics, and Unemployment Insurance in a Model of Growth and Distribution.” Metroeconomica: International Review of Economics 64(3): DOI: 10.1111/meca.12050;

NEWLY POSTED September 2017: A skeletal technical restatement of the 3D model in section 5.1 of the article. This 3 equation model can be reduced to a system of 3 (nonlinear) ordinary differential equations in three variables: p (public spending normalized by capital, u (capacity utilization) , and m (the goods-market markup). See the file for details.

abstract page for the article above: http://onlinelibrary.wiley.com/doi/10.1111/meca.12050/abstract;

article pdf: http://onlinelibrary.wiley.com/doi/10.1111/meca.12050/pdf

This scholarly journal article is a greatly revised version of Levy Institute working paper 723 (issued in 2012).  A copy of the journal article is available to colleagues upon request (my email address: mail at greghannsgen dot org).

II. An expanded version. A greatly expanded model appears in Levy Institute working paper 839 (2015), “Inside Money in a Kaldor-Kalecki-Steindl Fiscal Policy Model: The Unit of Account, Inflation, Leverage, and Financial Fragility,” which I coauthored with Tai Young-Taft of Bard College at Simon’s Rock. This version brings a substantive role for 1) the unit of account (in essence, variables in dollars or other currency matter for employment, growth, etc.); 2) the production process as a place where pollution, not just goods are generated; 3) stocks of consumer debt that cause a proneness to financial crisis as they accumulate; 4) credit for equity market participants that can generate stock-price bubbles, contributing to the likelihood of a financial crisis; and 5) a policy function with an unemployment rate target in place of the old utilization rate target. (The working paper above contained a simpler model of financial crises that was dropped in the Metroeconomica version in the interest of simplicity and brevity.)

NEW: This annotated file contains an early (2015) simulation in the form of a standalone Wolfram CDF of a simplified version of the expanded model that incorporated a non-fixed nominal wage along with private-sector debt. CDFs are interactive and can be viewed with the free Wolfram CDF Player, similarly to the .pdf format and Acrobat Reader. As you will see, the effort runs aground and lacks interesting results about the effects of changes in the assumptions. Our work goes on. (Link not live yet)

III. Our Ongoing Efforts: Our current work related to the fiscal policy model. Tai and I are currently working on papers that elaborate on various themes mooted in this working paper. We are also working on a paper for next January’s International Confederation of Associations for Pluralist Economics (ICAPE) conference that explores some implications of aspects of the economy that are not currently genderless. For example, women are more likely than men to be in certain industries and occupations.

The common denominators of these papers about “our model” include motion that is induced through the intrinsic dynamics of the economy, rather than added by random “shocks”–which are used routinely in the more-conventional “dynamic stochastic equilibrium” approach to macroeconomic dynamics.


We hope our colleagues and others will benefit from these resources linked to work we have presented at various conferences and  seminars, as well as the readers of this blog.

Copyright Notice: The idea of this “model page” or “model site” was conceived by this site’s founder Greg Hannsgen while he was with the Levy Economics Institute of Bard College. This page’s contents copyright Greg Hannsgen, except where other rights supersede, including Levy Institute working paper 839 and the article in Metroeconomica mentioned above, to which the Levy Institute and the journal’s publishers, respectively, hold copyright.

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