A Dynamic Model of Financial Balances for the United Kingdom

39 Pages Posted: 7 Sep 2016

See all articles by Stephen Burgess

Stephen Burgess

Bank of England

Oliver Burrows

Bank of England

Antoine Godin

Centre d'économie de l'Université de Paris Nord (CEPN); Agence Française de Développement (AFD); Hans-Boeckler-Stiftung - Macroeconomic Policy Institute (IMK)

Stephen Kinsella

University of Limerick

Stephen Millard

Bank of England

Date Written: September 2, 2016

Abstract

We construct a new scenario analysis model for the United Kingdom using ONS data from 1987 to the present. The model links decisions about real variables to credit creation in the financial sector and decisions about asset allocation among investors for a wide array of financial assets. We develop, estimate, and calibrate the model from first principles as well as describing the stock-flow coherent database we construct to validate the model. We impose several scenarios on the model to test its usefulness as a medium term scenario analysis tool, including increases in banks’ capital ratios, sudden stops, changes in investment, increases in house prices and fiscal expansions.

Keywords: Sectoral balances, flow of funds, macroeconomic modelling

JEL Classification: E21, E22, E25, E37

Suggested Citation

Burgess, Stephen and Burrows, Oliver and Godin, Antoine and Kinsella, Stephen and Millard, Stephen, A Dynamic Model of Financial Balances for the United Kingdom (September 2, 2016). Bank of England Working Paper No. 614. Available at SSRN: https://ssrn.com/abstract=2835386 or http://dx.doi.org/10.2139/ssrn.2835386

Stephen Burgess (Contact Author)

Bank of England

Threadneedle Street
London, EC2R 8AH
United Kingdom

Oliver Burrows

Bank of England ( email )

Antoine Godin

Centre d'économie de l'Université de Paris Nord (CEPN) ( email )

UMR7115
Université Paris-Nord
Paris XIII
France

Agence Française de Développement (AFD) ( email )

5, rue Roland Barthes
Paris Cedex 12, 75598
France

Hans-Boeckler-Stiftung - Macroeconomic Policy Institute (IMK) ( email )

Hans-Böckler-Straße 39
40476 Düsseldorf
Germany

Stephen Kinsella

University of Limerick ( email )

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

HOME PAGE: http://stephenkinsella.net

Stephen Millard

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

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