Social and Behavioral Sciences Commons^™

General Equilibrium Of A Regional Economy With A Financial Sector - Part Ii: A Simple Behavioral Model, Merritt R. Hughes

Merritt R Hughes

Simple behavioral assumptions are incorporated into an accounting framework that provides linked budget and balance sheets for sectors of a regional economy. A short-run Keynesian-type model is developed where quantities rather than prices adjust, and where regional prices and interest rates are equal to national levels. The analysis highlight the importance of the financial services sector as an active factor in regional growth. Consumer deposits and debt preferences, and limitations imposed on credit extension by the financial services sector can have important effects on the regional economy as evidenced by changes in the export multiplier.