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Theory and measurement in SFC models

Author

Listed:
  • Meijers, Huub

    (RS: GSBE MORSE, RS: GSBE other - not theme-related research, Macro, International & Labour Economics, Mt Economic Research Inst on Innov/Techn)

  • Muysken, Joan

    (RS: GSBE other - not theme-related research, Macro, International & Labour Economics, RS: GSBE - MACIMIDE)

Abstract

The overarching main purpose of this paper is to detail all data collection and data manipulation and choices to be made to come to a consistent dataset to estimate and calibrate an SFC model, for which we use the model as specified in Meijers and Muysken (2022) as reference. This also enables us to show more in general how data collection from national accounts in a stock-flow consistent way influences the modelling of an economy. We give examples for the composition of the wealth of households by including non-traded assets, the composition of the wealth of firms by identifying direct investments – both outward and inward, and the composition of the wealth of government by pointing out the substantial amount of assets owned by the government, which we ignore. Next to that, we identify the impact of pension funds on both decisions made by households, including forced savings, and on the entire financial sector. We show how the net foreign debt accumulates through a persistent trade balance surplus and is financed to a large extent by pension funds. Finally, we show that corrections in income and savings are required to retain the consistency of the model while staying close to the national accounts. All these observations have important consequences for modelling the savings and investment behaviour of the various sectors.

Suggested Citation

  • Meijers, Huub & Muysken, Joan, 2024. "Theory and measurement in SFC models," MERIT Working Papers 2024-017, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    • Handle: RePEc:unm:unumer:2024017
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    More about this item

    JEL classification:

    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • B50 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - General
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications

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