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Reforming the Eurozone financial system: A system-dynamics approach

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  • van Egmond, N.D.
  • de Vries, B.J.M.

Abstract

The effectiveness of the current monetary policy of the European Central Bank (ECB) in maintaining (price) stability in the eurozone is assessed using a system dynamic model. The model combines a neoclassical growth model with a stock-flow representation of the eurozone financial sector at a high level of aggregation. With endogenous money creation, the multidirectional relationship between asset prices and net income, and also the dual causality of both liquidity and investment relative to interest rates as the main features of the model, the developments of the past 50 years can be understood and extrapolated to 2050.

Suggested Citation

  • van Egmond, N.D. & de Vries, B.J.M., 2024. "Reforming the Eurozone financial system: A system-dynamics approach," International Review of Financial Analysis, Elsevier, vol. 93(C).
    • Handle: RePEc:eee:finana:v:93:y:2024:i:c:s1057521924001248
    DOI: 10.1016/j.irfa.2024.103192
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