Publications
Claudio H. Dos Santos
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Working Paper No. 594 | May 2010
Revisiting “New Cambridge”: The Three Financial Balances in a General Stock-flow Consistent Applied Modeling Strategy
View More View LessThis paper argues that modified versions of the so-called “New Cambridge” approach to macroeconomic modeling are both quite useful for modeling real capitalist economies in historical time and perfectly compatible with the “vision” underlying modern Post-Keynesian stock-flow consistent macroeconomic models. As such, New Cambridge–type models appear to us as an important contribution to the tool kit available to applied macroeconomists in general, and to heterodox applied macroeconomists in particular.Download:Associated Program:Author(s):Claudio H. Dos Santos Antonio C. Macedo e SilvaRelated Topic(s):
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Working Paper No. 567 | June 2009
An SFC Look at Financialization and Profit-led Growth
Many heterodox strands of thought share both a concern with the study of different phases or growth regimes in the history of capitalism and the use of formal short-run models as an analytical tool. The authors of this new working paper suggest (1) that this strategy is potentially misleading, and (2) that the stock-flow consistent (SFC) approach, while providing a general framework that may facilitate dialogue among those currents, is particularly well suited to all those who think that macroeconomic models may illuminate historical quests.
Download:Associated Program:Author(s):Claudio H. Dos Santos Antonio C. Macedo e SilvaRelated Topic(s): -
Working Paper No. 537 | July 2008
Peering Over the Edge of the Short Period
This paper argues that institutionally rich stock-flow consistent models—that is, models in which economic agents are identified with the main social categories/institutional sectors of actual capitalist economies, the short period behavior of these agents is thoroughly described, and the “period by period” balance sheet dynamics implied by the latter is consistently modeled—are (1) perfectly compatible with John Maynard Keynes’s theoretical views, (2) the ideal tool for rigorous post-Keynesian analyses of the medium run, and (3) therefore crucial to the consolidation of the broad post-Keynesian research program.
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Working Paper No. 503 | June 2007
A Simplified “Benchmark” Stock-flow Consistent (SFC) Post-Keynesian Growth Model
View More View LessDespite being arguably one of the most active areas of research in heterodox macroeconomics, the study of the dynamic properties of stock-flow consistent (SFC) growth models of financially sophisticated economies is still in its early stages. This paper attempts to offer a contribution to this line of research by presenting a simplified Post-Keynesian SFC growth model with well-defined dynamic properties, and using it to shed light on the merits and limitations of the current heterodox SFC literature.
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Strategic Analysis | September 2005
Can the Symbiosis Last?
The main arguments in this paper can be simply stated:
1) If output in the United States grows fast enough to keep unemployment constant between now and 2010, and if there is no further depreciation in the dollar, the deficit in the balance of trade is likely to get worse, perhaps reaching 7.5 per cent by the end of the decade.
2) If the trade deficit does not improve, let alone if it gets worse, there will be a large further deterioration in the United States’ net foreign asset position, so that, with interest rates rising, net income payments from abroad will at last turn negative and the deficit in the current account as a whole could reach at least 8.5 per cent of GDP.
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Working Paper No. 421 | April 2005
Despite being arguably the most rigorous form of structuralist/post-Keynesian macroeconomics, stock-flow consistent models are quite often complex and difficult to deal with. This paper presents a model that, despite retaining the methodological advantages of the stock-flow consistent method, is intuitive enough to be taught at an undergraduate level. Moreover, the model can easily be made more complex to shed light on a wealth of specific issues.
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Strategic Analysis | March 2005
As we projected in a previous Strategic Analysis, the United States' economy experienced growth rates higher than 4 percent in 2004. The question we want to raise in this Strategic Analysis is whether these rates will persist or come back down. We believe that several signs point in the latter direction. In what follows, we analyze the evidence and explore the alternatives facing the US economy.
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Working Paper No. 408 | May 2004
Stock-flow Consistent Models As an Unexplored "Frontier" of Keynesian Macroeconomics
This paper argues that the Stock-Flow Consistent Approach to macroeconomic modeling can be seen as a natural outcome of the path taken by Keynesian macroeconomic thought in the 1960s and 1970s, a theoretical frontier that remained largely unexplored with the end of Keynesian academic hegemony. The representative views of Davidson, Godley, Minsky, and Tobin as different closures of the same SFC accounting framework are presented, and similarities and problems discussed.
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Strategic Analysis | April 2004
Policies and Prospects in an Election Year
Wynne Godley, our Levy Institute colleague, has warned since 1999 that the falling personal saving and rising borrowing trends that had powered the US economic expansion were not sustainable. He also warned that when these trends were reversed, as has happened in other countries, the expansion would come to a halt unless there were major changes in fiscal policy.
Not long ago, official circles insisted that monetary policy was the most desirable tool, that fiscal deficits were not only unnecessary but also harmful (ERP 2000, pp.31–34; Greenspan 2000). Some economists, notably Edmund Phelps of Columbia University, went so far as to suggest that the economic expansion was not caused by rising demand, but rather because growth had become 'structural' (Financial Times, August 9, 2000).
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Working Paper No. 403 | February 2004
A Stock-flow Consistent General Framework for Formal Minskyan Analyses of Closed Economies
View More View LessThis paper reviews the general tenets of "stock-flow consistent" and the "formal Minskyan" literatures and argues that the advantages and weaknesses of the latter become clearer when analyzed with the tools of the former. It also analyzes a small but representative and influential sample of seminal "formal Minskyan" models, particularly the Taylor-O'Connel model, in light of a fully consistent "Minskyan artificial economy." The paper also shows these models often assume oversimplified hypotheses (that don't do justice to the richness of Minskyan analyses) and, more seriously, often ignore the logical implications of these hypotheses. Finally, the authors arugue that most of these problems can be tackled when "formal Minskyan" models are phrased as "closures" of the "general Minskyan" accounting framework described in the paper.
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Working Paper No. 402 | February 2004
Preliminary Results
Stock-flow consistent models may be considered the rallying point for heterodox authors interested in modeling macroeconomic relations, since these models incorporate real and financial relations in an entirely consistent way, therefore providing macroeconomic constraints to individual behavior. The present model expands on the Godley-Lavoie model of growth, which was based on a two-asset world, with only bank deposits and the shares issued by private corporations. The present model incorporates the financial relations among the central bank, private banks, and the fiscal policy of government, showing the endogeneity of money under different assumptions on banks' behavior. The model is used to analyze the relationship between the distribution of income and growth, and to study the impact of monetary policy.
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Strategic Analysis | October 2003
A Reprieve but Not a Pardon
These are fast-moving times. Two years ago, the Congressional Budget Office (CBO, 2001) projected a federal budget surplus of $172 billion for fiscal year 2003. Within a year, the projected figure had changed to a deficit of $145 billion (CBO 2002). The actual figure, near the end of fiscal year 2003, turned out to be a deficit of about $390 billion. And just one month ago, President Bush submitted a request to Congress for an additional $87 billion appropriation for war expenditures, over and above the $166 billion tallied so far. It is widely anticipated that even this will have to be revised upward by the end of the coming year (Stevenson 2003; Firestone 2003).
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Policy Note 2003/6 | September 2003
A Note of Caution
The current account deficit of the United States has been growing steadily as a share of GDP for more than a decade. It is now at an all-time high, over 5 percent of GDP. This steady deterioration has been greeted with an increasing amount of concern (U.S Trade Deficit Review Commission 2000; Brookings Papers 2001; Godley 2001; Mann 2002). At The Levy Economics Institute, we have long argued that this burgeoning deficit is unsustainable. A current account deficit implies a growing external debt, which in turn implies a continuing shift in net income received from abroad (net interest and dividend flows) in favor of foreigners. We have also noted that with the private sector headed toward balance, a growing current account deficit implies a corresponding growing “twin” deficit for the government sector (Papadimitriou et al. 2002; Godley 2003). This latter scenario has already come to pass: the latest figures show that the general government deficit rose to an annual rate of more than 4 percent of GDP in the first quarter of 2003 and will certainly rise even more in the near future, since the federal deficit alone is officially projected to reach 4 percent by the end of this fiscal year (CBO 2003).
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Working Paper No. 387 | September 2003
Methodology and Results
This paper provides the details of the construction of new quarterly measures of the real GDPs of the 36 trading partners that are taken into consideration by the Federal Reserve in its "broad exchange rate" indexes. These new measures have some important advantages. First, they allow the construction of various income aggregates and sub-aggregates, which makes it possible, for example, to match the Federal Reserve's "broad," "major-currency," and "other important" trading partner effective exchange rates and, more broadly, to discuss the geographical and geopolitical determinants of US trade. Second, they allow the construction of variants of the two different types of measures that are utilized in the literature, namely direct and export-share-weighted sums of trading-partner real GDPs. Finally, given that our new measures of GDP for these countries can be directly compared to each other, they can be of interest for other researchers who need a consistent dataset on a quarterly basis.
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Strategic Analysis | November 2002
The long economic expansion was fueled by an unprecedented rise in private expenditure relative to income, financed by a growing flow of net credit to the private. On the surface, it seemed that the growing burden of the household sector’s debt was counterbalanced by a spectacular rise in the relative value of its financial assets, but this was never a match among equals, and the great meltdown in the financial markets has proved this imbalance to be true. The private sector has dramatically cut back its acquisition of new credit and reversed the path of its financial balance, but this adjustment has been uneven within the sector: the business sector has suffered a huge drop in investment while the household sector has continued to borrow.
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