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Full-Text Articles in Public Policy
General Equilibrium Of A Regional Economy With A Financial Sector - Part Ii: A Simple Behavioral Model, Merritt R. Hughes
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.
General Equilibrium Of A Regional Economy With A Financial Sector - Part 1: An Accounting Framework With Budget And Balance Sheet Linkages, Merritt R. Hughes
General Equilibrium Of A Regional Economy With A Financial Sector - Part 1: An Accounting Framework With Budget And Balance Sheet Linkages, Merritt R. Hughes
Merritt R Hughes
An accounting framework is presented that can be used as a basis for a regional general equilibrium economic model that meaningfully incorporates both real and financial activity. The accounting framework describes a circular flow from regional income to credit base, and back to regional income, including the balance of payments identity. Both real market transactions and capital stock changes are explicitly recognized. Linkages between real activity flows and sectoral balance sheets are highlighted. Financial activity is recognized as a service, and all assets are assumed to be valued at market prices.