When considering a regional context, most adjusting mechanisms at work in open economy Stock-Flow Consistent models—such as exchange rate movements, or changes in interest on public debt—are not present, as they are in control of “external” authorities. So, how does a regional system with “current account” imbalances adjust? To answer this question, we adapt the framework suggested in Godley-Lavoie (2007a) to consider two regions that share the same monetary, fiscal, and exchange rate policies. The model—loosely calibrated over Italian data, with the introduction of a fragmented labour market—replicates some key features of the Italian economy, and sheds light on the interactions between financial and real markets in regional economies.
A prototype regional stock‐flow consistent model / Zezza, Francesco; Zezza, Gennaro. - In: METROECONOMICA. - ISSN 0026-1386. - (2022). [10.1111/meca.12416]
A prototype regional stock‐flow consistent model
Francesco Zezza
Primo
;
2022
Abstract
When considering a regional context, most adjusting mechanisms at work in open economy Stock-Flow Consistent models—such as exchange rate movements, or changes in interest on public debt—are not present, as they are in control of “external” authorities. So, how does a regional system with “current account” imbalances adjust? To answer this question, we adapt the framework suggested in Godley-Lavoie (2007a) to consider two regions that share the same monetary, fiscal, and exchange rate policies. The model—loosely calibrated over Italian data, with the introduction of a fragmented labour market—replicates some key features of the Italian economy, and sheds light on the interactions between financial and real markets in regional economies.File | Dimensione | Formato | |
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