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Solution and Simulation of Large Stock Flow Consistent Monetary Production Models Via the Gauss Seidel Algorithm

34 Pages Posted: 9 Mar 2011  

Stephen Kinsella

University of Limerick

Terence O'Shea

University of Limerick - Kemmy Business School

Date Written: December 21, 2010

Abstract

This paper builds and solves a stock flow consistent model in the tradition of Godley and Lavoie (2007). The goal of this paper is to develop a benchmark model that is both thorough and flexible enough to be applied to modern industrialized economies to aid monetary and fiscal policy decisions. The main difficulty with stock-flow consistent models is the complexity of the models and their solutions. To reduce the complexity of the solution of each model, an algorithm is developed using the Gauss-Seidel method. This algorithm is successful in solving the expansive linear system of equations representing our economy. Given our choice of parameters, our benchmark model achieves a steady state with an inflation rate of 2%, whilst maintaining full employment.

Keywords: Gauss Seidel, Stock Flow Consistent Model, Growth Model

JEL Classification: C63, E27, E47

Suggested Citation

Kinsella, Stephen and O'Shea, Terence, Solution and Simulation of Large Stock Flow Consistent Monetary Production Models Via the Gauss Seidel Algorithm (December 21, 2010). Journal of Policy Modeling, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1729205 or http://dx.doi.org/10.2139/ssrn.1729205

Stephen Kinsella (Contact Author)

University of Limerick ( email )

Limerick
Ireland
+35361233611 (Phone)
+35361330316 (Fax)

HOME PAGE: http://stephenkinsella.net

Terence O'Shea

University of Limerick - Kemmy Business School ( email )

Limerick
Ireland

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