The aim of this thesis is to provide tools in order to simplify and extend the analysis of stock-flow consistent macroeconomic models. For models in continuous time, we will focus on stability and steady state solutions, considering constant exogenous parameters. For models in discrete time, we will derive systems with considerable reduction in complexity and size from rather big linear systems of equations set up by previous authors into much simpler systems of difference equations. These can then also be analyzed from a continuous perspective, if their limits are taken. We will also see how an alternative continuous layout of the models proposed by us, further reduces the number of dimensions with respect to their counterparts in discrete time, in some cases. / Thesis / Master of Science (MSc)

It is increasingly recognized that banks might not be pricing adequately climate risks in the value of their loans contracts. This represents a barrier to scale up the green investments needed to align the economy to sustainability and to preserve financial stability. To overcome this barrier, climate-aligned policies, such as a revision of the microprudential banking framework (for example a Green Supporting Factor (GSF )), and the introduction of stable green fiscal policies (for example a Carbon Tax (CT )), have been advocated. However, understanding the conditions under which a GSF or a CT could represent an opportunity for scaling up green investments, while preventing trade-offs on risk for financial stability, is still insufficient. We contribute to fill this knowledge gap threefold. First, we analyse the risk transmission channels from climate-aligned policies, a GSF and a CT, to the credit market and the real economy via loans contracts. Second, we assess the reinforcing feedbacks leading to cascading macro-financial shocks. Third, we consider how banks could react to the policies, i.e., their climate sentiments. In this regard, we embed for the first- time banks climate sentiments, modelled as a non-linear adaptive forecasting function into a Stock-Flow Consistent model that represents agents and sectors of the real economy and the credit market as a network of interconnected balance sheets. Our results suggest that the GSF is not sufficient to effectively scale up green investments via a change in lending conditions to green firms. In contrast, the CT could shift the bank's loans and the green/brown firms' investments towards the green sector. Nevertheless, it could imply short-term negative transition effects on GDP growth and financial stability, according to how the policy is implemented. Finally, our results show that bank's anticipation of a climate-aligned policy, through stronger climate sentiments, could smooth the risk for financial stability and foster green investments. Thus, our results contribute to understand the conditions for the onset and the mitigation of climate-related financial risks and opportunities. / Series: Ecological Economic Papers

It is increasingly recognized that banks might not be pricing adequately climate risks in the value of their loans contracts. This represents a barrier to scale up the green investments needed to align the economy to sustainability and to preserve financial stability. To overcome this barrier, climate-aligned policies, such as a revision of the microprudential banking framework (for example a Green Supporting Factor (GSF )), and the introduction of stable green fiscal policies (for example a Carbon Tax (CT )), have been advocated. However, understanding the conditions under which a GSF or a CT could represent an opportunity for scaling up green investments, while preventing trade-offs on risk for financial stability, is still insufficient. We contribute to fill this knowledge gap threefold. First, we analyse the risk transmission channels from climate-aligned policies, a GSF and a CT, to the credit market and the real economy via loans contracts. Second, we assess the reinforcing feedbacks leading to cascading macro-financial shocks. Third, we consider how banks could react to the policies, i.e., their climate sentiments. In this regard, we embed for the first- time banks climate sentiments, modelled as a non-linear adaptive forecasting function into a Stock-Flow Consistent model that represents agents and sectors of the real economy and the credit market as a network of interconnected balance sheets. Our results suggest that the GSF is not sufficient to effectively scale up green investments via a change in lending conditions to green firms. In contrast, the CT could shift the bank's loans and the green/brown firms' investments towards the green sector. Nevertheless, it could imply short-term negative transition effects on GDP growth and financial stability, according to how the policy is implemented. Finally, our results show that bank's anticipation of a climate-aligned policy, through stronger climate sentiments, could smooth the risk for financial stability and foster green investments. Thus, our results contribute to understand the conditions for the onset and the mitigation of climate-related financial risks and opportunities. / Series: Ecological Economic Papers

A presente dissertação tem por objetivo discutir diferentes aspectos de um método de modelagem econômica conhecido por Modelos Stock-Flow Consistent (SFC). Essa classe de modelos tem como principais características a presença de matrizes que representam os balanços patrimoniais dos setores modelados, bem como os fluxos de transações e de fundos financeiros. A primeira etapa do trabalho consiste em analisar as origens dos modelos SFC, apresentando os trabalhos que precederam as primeiras formulações. Em seguida, é feito um survey completo da literatura SFC corrente. Essas duas etapas são realizadas através de uma revisão bibliográfica de artigos, working papers, teses e dissertações. A terceira etapa do trabalho consiste em discutir aspectos metodológicos da modelagem SFC, em especial a modelagem de equações comportamentais de expectativas. Por fim, um modelo SFC é elaborado com o objetivo de analisar o comportamento de uma economia sob quatro regimes fiscais diferentes: (i) balanço equilibrado; (ii) meta de gastos do governo como proporção do PIB; (iii) meta de déficit do governo como proporção do PIB; (iv) meta de dívida pública como proporção do PIB. O comportamento em estado estacionário desses regimes é analisado, bem como sua resiliência a choques. Entre as conclusões, percebeu-se que o segundo regime apresenta a maior taxa de crescimento no steady state, além de ser mais resiliente a choques negativos. / The general goal of this dissertation is to discuss different dimensions of a class of Post-Keynesian models known as Stock-Flow Consistent Models. The main features of these models are: (i) the presence of balance sheets matrices of the sectors to be modeled, guaranteeing the consistency in the economic stocks; (ii) the flow of funds matrix, that records the real and financial transactions of the economy. The first step of the work is to analyze the origins of the SFC models, presenting the works that preceded the first elaborations. Next to it, the current SFC literature is surveyed. These two steps are accomplished by means of a survey of the literature in academic journals, working papers, dissertations and thesis. The third step of the work is a discussion of methodological issues such as the role of expectations in the behavioral functions for consumption. Finally, the fourth step consists of elaborating a SFC model in order to analyze four fiscal policy regimes: (i) balanced budget, (ii) a target for government’s expenditures , (iii) a target for government deficit, and (iv) a target for government debt. The steady state behavior of each regime is analyzed, as well as its resilience to adverse shocks. The second regime is the one with the higher steady state growth rate and also is the more resilient to negative shocks.

A presente dissertação tem por objetivo discutir diferentes aspectos de um método de modelagem econômica conhecido por Modelos Stock-Flow Consistent (SFC). Essa classe de modelos tem como principais características a presença de matrizes que representam os balanços patrimoniais dos setores modelados, bem como os fluxos de transações e de fundos financeiros. A primeira etapa do trabalho consiste em analisar as origens dos modelos SFC, apresentando os trabalhos que precederam as primeiras formulações. Em seguida, é feito um survey completo da literatura SFC corrente. Essas duas etapas são realizadas através de uma revisão bibliográfica de artigos, working papers, teses e dissertações. A terceira etapa do trabalho consiste em discutir aspectos metodológicos da modelagem SFC, em especial a modelagem de equações comportamentais de expectativas. Por fim, um modelo SFC é elaborado com o objetivo de analisar o comportamento de uma economia sob quatro regimes fiscais diferentes: (i) balanço equilibrado; (ii) meta de gastos do governo como proporção do PIB; (iii) meta de déficit do governo como proporção do PIB; (iv) meta de dívida pública como proporção do PIB. O comportamento em estado estacionário desses regimes é analisado, bem como sua resiliência a choques. Entre as conclusões, percebeu-se que o segundo regime apresenta a maior taxa de crescimento no steady state, além de ser mais resiliente a choques negativos. / The general goal of this dissertation is to discuss different dimensions of a class of Post-Keynesian models known as Stock-Flow Consistent Models. The main features of these models are: (i) the presence of balance sheets matrices of the sectors to be modeled, guaranteeing the consistency in the economic stocks; (ii) the flow of funds matrix, that records the real and financial transactions of the economy. The first step of the work is to analyze the origins of the SFC models, presenting the works that preceded the first elaborations. Next to it, the current SFC literature is surveyed. These two steps are accomplished by means of a survey of the literature in academic journals, working papers, dissertations and thesis. The third step of the work is a discussion of methodological issues such as the role of expectations in the behavioral functions for consumption. Finally, the fourth step consists of elaborating a SFC model in order to analyze four fiscal policy regimes: (i) balanced budget, (ii) a target for government’s expenditures , (iii) a target for government deficit, and (iv) a target for government debt. The steady state behavior of each regime is analyzed, as well as its resilience to adverse shocks. The second regime is the one with the higher steady state growth rate and also is the more resilient to negative shocks.

A presente dissertação tem por objetivo discutir diferentes aspectos de um método de modelagem econômica conhecido por Modelos Stock-Flow Consistent (SFC). Essa classe de modelos tem como principais características a presença de matrizes que representam os balanços patrimoniais dos setores modelados, bem como os fluxos de transações e de fundos financeiros. A primeira etapa do trabalho consiste em analisar as origens dos modelos SFC, apresentando os trabalhos que precederam as primeiras formulações. Em seguida, é feito um survey completo da literatura SFC corrente. Essas duas etapas são realizadas através de uma revisão bibliográfica de artigos, working papers, teses e dissertações. A terceira etapa do trabalho consiste em discutir aspectos metodológicos da modelagem SFC, em especial a modelagem de equações comportamentais de expectativas. Por fim, um modelo SFC é elaborado com o objetivo de analisar o comportamento de uma economia sob quatro regimes fiscais diferentes: (i) balanço equilibrado; (ii) meta de gastos do governo como proporção do PIB; (iii) meta de déficit do governo como proporção do PIB; (iv) meta de dívida pública como proporção do PIB. O comportamento em estado estacionário desses regimes é analisado, bem como sua resiliência a choques. Entre as conclusões, percebeu-se que o segundo regime apresenta a maior taxa de crescimento no steady state, além de ser mais resiliente a choques negativos. / The general goal of this dissertation is to discuss different dimensions of a class of Post-Keynesian models known as Stock-Flow Consistent Models. The main features of these models are: (i) the presence of balance sheets matrices of the sectors to be modeled, guaranteeing the consistency in the economic stocks; (ii) the flow of funds matrix, that records the real and financial transactions of the economy. The first step of the work is to analyze the origins of the SFC models, presenting the works that preceded the first elaborations. Next to it, the current SFC literature is surveyed. These two steps are accomplished by means of a survey of the literature in academic journals, working papers, dissertations and thesis. The third step of the work is a discussion of methodological issues such as the role of expectations in the behavioral functions for consumption. Finally, the fourth step consists of elaborating a SFC model in order to analyze four fiscal policy regimes: (i) balanced budget, (ii) a target for government’s expenditures , (iii) a target for government deficit, and (iv) a target for government debt. The steady state behavior of each regime is analyzed, as well as its resilience to adverse shocks. The second regime is the one with the higher steady state growth rate and also is the more resilient to negative shocks.

We aim to investigate the stability of various stock-flow consistent economic models, and the potential causes for economic collapse therein. Through parameter sensitivity analysis, we study models that feature a public sector, an active central bank, and a household sector with independent consumption. Our final, most comprehensive economic system combines all of the intricacies of each model, prominently featuring a demand-driven economy that is stabilized by an expansionary monetary policy. In addition, we incorporate a climate module for each economic system, and analyze public sector intervention through carbon taxes and abatement subsidies. We find that the most common feature of economic instability is a lack of demand, driven by decreases in capital investment from firms, as well as a decline in household consumption. In order to maintain a stable growth path and prevent a permanent economic contraction, we propose the implementations of an expansionary monetary policy, increased public sector subsidies of abatement costs, and stricter carbon taxes. / Thesis / Master of Science (MSc)

Questo lavoro si compone di due parti. La prima parte, costituita dal capitolo primo, fornisce una comparazione teorica di due teorie economiche in ambito di dottrina monetaria, ovvero la teoria New Keynesiana e quella Post Keynesiana. Nella seconda parte, viene ideato e implementato attraverso il software un modello teorico macroeconomico di impostazione Post Keynesiana. L’argomento di analisi è il processo di cartolarizzazione – illustrato nel capitolo 2 – che è stato al centro della crisi finanziaria che ha colpito gli Stati Uniti nel 2007-2009. L’obiettivo del lavoro è quello di analizzare, attraverso la costruzione di un modello – esposto nel capitolo 3 – che utilizza la metodologia Stock-Flow Consistent, i collegamenti tra il settore finanziario e il mercato delle case al fine di stabilire la natura della crisi: si è trattato di una crisi trainata dalla finanza o dal comportamento delle famiglie? La novità del nostro lavoro consiste nella descrizione dettagliata nell’ambito dell’approccio Stock-Flow Consistent del comportamento delle banche private, assumendo una gestione attiva di bilancio da parte delle banche di investimento. / This work is basically divided into two parts. The first part – chapter 1 – provides a comparison between two theory of monetary economics: New Keynesian and Post Keynesian. The second part is represented by the elaboration and implementation of a theoretical macroeconomic model, grounded in Post Keynesian theory. The subject under investigation is the securitization process – illustrated in chapter 2 – which has been at the centre of the 2007-2009 crisis in the United States. The aim is to analyze, through the construction of an elaborate model – in chapter 3 – the links between the financial sector and the housing market and to assess the nature of the crisis: was the 2007-2009 financial crisis a households-led or a finance-led crisis? The novelty of our work is represented by the detailed description in the Stock-Flow Consistent approach of the private banking sector, assuming that investment banks carry out an active management of their balance sheets.

Economic policy in the EU faces a trilemma of solving three challenges simultaneously - growth, distribution, and the environment. In order to assess policies that address these issues simultaneously, economic models need to account for both sector-sector and sector-environment feedbacks within a single framework.This paper presents a multi-sectoral stock-flow consistent (SFC) macro model where a demand-driven economy consisting of multiple institutional sectors - firms, energy, households, government, and financial - interacts with the environment. The model is calibrated for the EU region and five policy scenarios are evaluated; low consumption, a capital stock damage function, carbon taxes, higher share of renewable energy, and technological shocks to productivity. Policy outcomes are tracked on overall output, unemployment, income and income distributions, energy, and emission levels. Results show that investment in mitigation technologies allows for absolute decoupling and ensures that the above three issues can be solved simultaneously. / Series: WWWforEurope

The first two chapters are dedicated to the modeling and implementation of a stock-flow consistent framework that incorporates real estate as an asset in the portfolio of the household. The third chapter investigates the main determinants of mortgage repayment of Canadian households. This first chapter presents a five-sector stock-flow consistency growth model where the portfolio decision of the households includes their choice of how much real estate they are interested in holding. The primary aim of the chapter is to model the housing market using the stock-flow consistent approach to explain the current global financial problem triggered by the housing market. The model is then simulated to predict the behaviour of various variables and propose appropriate solutions to the financial problem in the hope of returning the economy to a suitable equilibrium. Households' portfolio consists of money deposits, bills, bank equities and real estate. The other sectors that interact with the household sector are the production firms, the banks, the central bank and the government. Aside from the household sector, the banking sector ends up holding some real estate equivalent to the amount of mortgages defaulted by the households. The supply of real estate from the production sector is therefore augmented by the additional ones held by the banks. The second chapter presents the implementation of the stock-flow consistency model of first chapter. The purpose of the chapter is to run a simulation of the model and experiment with shocks to determine the path of the economic variables of the model. Another objective in performing the experiments is to find policies for mitigating the housing crisis. The model is implemented using the Eviews computer modeling software and runs until a stationary steady state is achieved. Various shocks are applied to the baseline stationary state. The results of the monetary policy show that the mortgage rate shock is more effective in influencing the growth rate of the economy as well as controlling the real estate market. Government fiscal policy is also effective in regulating the housing market. A one-period temporary fiscal policy shock is even capable of generating permanent long run growth effects. Household expectations in future housing price increases or future high rates of housing returns have the effect of heating the real estate market without comparable increases in economic growth. Policy makers must keep these expectations in check. The third chapter analyzes the determinants of mortgage repayment options in Canada. With the freedom that comes with being debt-free and owning a home one will assume that households pay off their mortgages as soon as possible. However, there are factors that inhibit households from carrying out these payoffs. The study uses Canadian micro-level data to examine factors that drive households to default, prepay or continue to make regular mortgage payments. The research methodology uses multinomial (polytomous) logistic regression analyzes. The empirical results establish that the traditional mortgage related predictor variables for repayment are statistically significant with the expected signs. The results relating to the provinces are not significantly different from each other. The results did not however provide any significance in relation to mortgage rates and the number of children in the household.