Content, progress and pedagogy of the module

The course "Empirical Stock-Flow Consistent Models" is designed to equip students with the tools and techniques required to construct, calibrate, and use empirical SFC models for real-world economic analysis. The course begins with a focus on the uses and scope of empirical SFC models, teaching students how to define the boundaries of a model based on the economic questions or policy issues at hand. As the course progresses, students will learn how to prepare and generate the essential data for constructing the model, including how to fill gaps in data that Statistical Institutes do not directly provide. Special emphasis is placed on ensuring stock-flow consistency, a core principle of SFC models, by maintaining coherence between the stocks and flows of economic agents. Students will also learn to incorporate econometrically estimated behavioral equations into the model, enhancing its ability to simulate real-world economic dynamics. Further, the course introduces model validation techniques to assess the model’s accuracy and reliability. Since this module includes a project, it is expected that students progressively acquire the techniques learnt throughout the course by building their own data bases, matrices and models. The pedagogical proposal is to present each step of the building process of an empirical SFC model in a lecture, that then students have a few days to replicate the methodology seen in class for their project, and that the following lecture adopts a workshop style where the different groups show their progress and present the challenges they are facing. The iteration of this process throughout the different steps of the model building process should facilitate the learning process. Since the module involves the writing of a project, each student group would have a supervisor assigned that will follow their progress and assist them in the process.

Learning objectives

Knowledge

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

• The Purpose and Scope of Empirical SFC Models.
• Preparing and generating data for building empirical SFC Models.
• Ensuring stock-flow consistency of economic models.
• Incorporating econometrically estimated behavioural equations into the structure of an empirical SFC model.
• Conducting policy, scenario, and sensitivity analyses.

Skills

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

• Collecting and manipulating the data from National Accounts to make it fit for the construction of an SFC model.
• Constructing a dynamic system of equations representing a monetary economy with multiple real and financial interactions and feedback loops.
• Calibrating and estimating empirical SFC models, ensuring consistency between stock and flow data.
• Using validation techniques to ensure that the model fits real-world data and behaves realistically over time.
• Conducting policy analysis, exploring different economic scenarios, and assessing how sensitive the model is to changes in parameters or assumptions.

Competences

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

• Evaluating the quality and reliability of data, filling gaps in missing information, and adjusting for inconsistencies to create a robust empirical dataset.
• Designing and managing an SFC model that incorporates both real and financial sectors of the economy, ensuring full consistency between stocks and flows.
• Using empirical SFC models to critically assess the impact of economic policies, including fiscal and monetary interventions, on macroeconomic stability and growth.
• Interpreting and integrating behavioral insights from econometric estimations to reflect the actions of different economic agents within the model.

Type of instruction

For information see §17.

Exam

Exams