Building a Common Language, feedback

The Limerick SFC workshop, second of a series of three, was aiming at building a common language for Macro-Modelling. After two days of intense debates and exchanges, we can conclude that the goal is on its way to being achieved. Indeed, surfing on the outcome of the Dijon gathering, we could get to the core of what is retained as essential for macro modelling. But first thing first, let’s have a quick summary of these challenging two days.

Macro-foundations of Micro and Micro-foundations of macro: Income Distribution, Increasing risks and Household Behaviours

The aim of the paper is to synthesize the stock-flow consistent modelling and the agent based modelling using the EVIEWS software. Then we try to make it compatible the macroeconomic framework of the post Keynesian SFC modelling ("top-down model") and heterogeneous microeconomic foundations ("bottom-up model"). The heterogeneity of agents concerns thehouseholds.

Exploiting the volume clock: an agent-based model of high and low frequency trading

This work builds an agent-based model of financial markets to investigate how the interplay between high and low frequency traders can affect stock price volatility and the occurrence of flash crashes in financial markets. The increased occurrence and severity of flash crashes and excessive volatility of stock prices observed in financial time series have been associated to the rising importance of high frequency trading (HFT, see for instance, Sornette and Von der Becke, 2011, and further references therein).

Appropriate Macroeconomic Policy for Complex Economies

The Great Recession has shown that income distribution and financial factors, which were constantly downplayed (at best) by mainstream models, appeared to have a fundamental role at least as triggers of the outburst of recessionary dynamics (Stiglitz, 2011). However, both mainstream theory and policy are navigating by sight (Blanchard et al., 2013): for example the impact and the interactions between fiscal, monetary and macro-prudential tools during recessions is still unclear.

A multi-euro Europe: a SFC approach

The euro zone crisis illustrates the insufficiency of adjustment mechanisms in a monetary union characterized by a large heterogeneity. The paper presents a first version of a four country SFC model aimed at testing alternative versions of a multi-euro Europe, i.e. a euro zone with two euros, a southern euro and a northern euro, combined, or not, with a global euro floating against the dollar.


In the recent years the Colombian economy grew relatively rapidly, but it was a biased growth. The energy sector (the locomotora minero-energetica, to use the rhetorical expression of President Juan Manuel Santos) grew much faster than the rest of the economy. The agricultural sector did not grow that rapidly and, above all, the manufacturing sector registered a negative rate of growth. These are the symptoms of the well-known “Dutch disease”.

Securitization, housing market and banking sector behavior in a Stock-Flow Consistent model

This paper focuses on the different balance sheet management behavior of private banks and worker households, when assets are market-based. We take into consideration the securitization process, through which mortgage lending of households are converted into tradable securities that are demanded by investment banks in order to make profits.

Credit money in an agent-based macro model

The complexity perspective of economics can serve as a framework for arguments from several economic traditions, notably to stock-flow consistency. It is a banality to state that firms and banks do accounting and this impacts their decisions, which is why it is important that accounting present in a comprehensive model. If an economy is analyzed as a complex system, interactions of agents that explain emergent phenomena.

Outlines of the medium run for central banking

The five years following the global finanancial crisis of 2007 have been a period of change for central bank policy-making. The Fed shifted its target from the Fed Funds rate to balance-sheet quantities. The ECB found its monetary union sorely tested, and was reluctantly brought about to addressing internal imbalances. The BoJ is attempting to jawbone inflation. The PBoC is trying to forestall a ma jor credit crisis.