The main purpose of this paper is to show how a simple (medium-scale) empirical stock–flow consistent dynamic model can be developed from scratch. Eurostat data and conventional statistical packages (notably EViews, Excel and R) are used. On the theoretical side, the work builds upon the pioneering work of Godley/Lavoie (2007). Sectoral transactions–flow matrices and balance sheets are explicitly modelled and their evolution over time under different scenarios is analysed. On the empirical side, the model draws upon the applied work of Burgess et al. (2016). The case of Italy is considered, but the model can be replicated for other countries. Eurostat annual data (from 1995 to 2016) are used to estimate or calibrate most model parameter values (for example, consumption function and housing investment parameters). Remaining parameters are borrowed from the available literature or taken from a range of realistic values (for example, weight on past errors in agents' expectations). The model is then used to impose and compare alternative scenarios for Italian sectoral financial balances, based on different shocks to government spending.
Marco Veronese Passarella
Riccardo Bellofiore and Marco Veronese Passarella
Augusto Graziani (1933–2014) was one of the most eminent Italian economists of the twentieth century. He is internationally known as the founding father of the theory of monetary circuit. His contributions to economic theory went beyond the circuit, especially in the early part of his career. They included both other theoretical areas (for example, a critical review of Walras's general equilibrium model) and the analysis of the ‘uneven development’ of the Italian economy. Even his approach to ‘circuitism’ was quite original and cannot be reduced to a special branch of post-Keynesianism. This introduction to the symposium on ‘The Economics of Augusto Graziani’ highlights some key points of his heretical thinking, and gives a quick summary of the papers that follow.
Giuseppe Fontana, Riccardo Realfonzo and Marco Veronese Passarella
The 2010s have witnessed a new shift in central banking and, partially at least, in monetary economics and macroeconomic modelling. It is a fact that the endogenous money theory has been gradually clawing back popularity at the expense of the classical theory of interest rates, the financial intermediation view of banks, the money-multiplier story and the quantity theory of money. However, the loanable funds theory and the view of banks as pure financial intermediaries (sometimes coupled with the money-multiplier story) are still sometimes invoked. In addition, the dynamic process of creation, circulation and destruction of money is usually neglected. The point is that money endogeneity is still regarded by many mainstream economists as a mere empirical fact, not a key feature of capitalist market-based economies to be properly explained by a logically consistent theory. By contrast, dissenting economists have further advanced the endogenous money view through: (a) a generalised theory of the endogenous process of money creation; (b) the increasing popularity of modern monetary theory in the public debate; and (c) the development of aggregative stock–flow consistent models and agent-based stock–flow consistent models as an alternative to dynamic stochastic general equilibrium models.