Content, progress and pedagogy of the module

The course "The Principles of Stock-Flow Consistent Models" is designed to introduce students to the core concepts and techniques of stock-flow consistent (SFC) modeling within the context of a monetary economy. The course content begins by familiarizing students with the principles of SFC models, emphasizing their importance in ensuring consistency between stocks (e.g., wealth, debt) and flows (e.g., income, expenditure) over time. As the course progresses, students will learn how to connect the SFC matrices to the system of national accounts, building a set of equations that represent the financial and real transactions between different sectors of the economy. The modeling of institutional agents (households, firms, government, and banks) is covered in detail, providing students with a comprehensive understanding of how each sector interacts within an SFC framework. Students will also develop practical skills in calibrating, solving, and simulating theoretical models, allowing them to analyze economic dynamics under different scenarios. The pedagogy combines theoretical lectures with hands-on modeling exercises, culminating in the use of SFC models for policy analysis and scenario planning, equipping students with the tools to apply these models in real-world economic contexts.

Learning objectives

Knowledge

The objective is that the student after the module possesses the necessary knowledge on:

• The structure of Stock-Flow Consistent (SFC) Models.
• The transmission channels between the real and financial spheres of a monetary economy.
• The link of SFC models to the System of National Accounts.
• The standard ways of modelling the different institutional agents (sectors) of an economy.
• Using SFC models for policy and scenario analysis.

Skills

The objective is that the student after the module possesses the necessary skills in:

• Building and manipulating systems of equations representing economies using the SFC approach.
• Adjusting model parameters to fit theoretical or empirical data, allowing for realistic simulations.
• Simulating theoretical SFC models using software tools (R) to analyze economic scenarios.
• Using SFC models to perform scenario analysis and explore potential outcomes of various economic policies or shocks.

Competences

The objective is that the student after the module possesses the necessary competences in:

• Thinking holistically about the economy, ensuring all sectors and their interactions are considered in a consistent framework.
• Using SFC models to critically assess the impact of fiscal, monetary, and other economic policies on different sectors of the economy.
• Analyzing the role and behavior of institutional agents (e.g., households, firms, government, banks) within a dynamic economy, understanding their interactions and feedback loops.
• Adapting and modifying SFC models to fit different economic contexts or specific research questions, ensuring the model remains robust and relevant.

Type of instruction

For information see §17.

Exam

Exams