A stock-flow-fund ecological macroeconomic model

Dafermos, Yannis; Nikolaidi, Maria; Galanis, Giorgos

Abstract

This paper develops a stock-flow-fund ecological macroeconomic model that combines the stock-flow consistent approach of Godley and Lavoie with the flow-fund model of Georgescu-Roegen. The model has the following key features. First, monetary and physical stocks and flows are explicitly formalised taking into account the accounting principles and the laws of thermodynamics. Second, Georgescu-Roegen's distinction between stock-flow and fund-service resources is adopted. Third, output is demand-determined but supply constraints might arise either due to environmental damages or due to the exhaustion of natural resources. Fourth, climate change influences directly the components of aggregate demand. Fifth, finance affects macroeconomic activity and the materialisation of investment plans that determine ecological efficiency. The model is calibrated using global data. Simulations are conducted to investigate the trajectories of key environmental, macroeconomic and financial variables under (i) different assumptions about the sensitivity of economic activity to the leverage ratio of firms and (ii) different types of green finance policies.

Citation

Dafermos, Y., Nikolaidi, M., & Galanis, G. (2017). A stock-flow-fund ecological macroeconomic model. Ecological Economics, 131, 191-207. https://doi.org/10.1016/j.ecolecon.2016.08.013

• Journal Article Type: Article
• Acceptance Date: Aug 12, 2016
• Online Publication Date: Sep 14, 2016
• Publication Date: Jan 1, 2017
• Deposit Date: Aug 9, 2019
• Publicly Available Date: Aug 9, 2019
• Journal: Ecological Economics
• Print ISSN: 0921-8009
• Electronic ISSN: 1873-6106
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 131
• Pages: 191-207
• DOI: https://doi.org/10.1016/j.ecolecon.2016.08.013
• Keywords: ecological macroeconomics, stock-flow consistent modelling, laws of thermodynamics, climate change, finance