Full text: Extension of the empirical stock-flow consistent (SFC) model for Austria (163)

IHS—Miess, Schmelzer/SFC Model Austria—57
6 Conclusion and Outlook
The purpose of this document was to give a first overview and exploratory simulations of a newly
developed empirical SFC model of the Austrian economy, which is still work in progress. While
the projections and mechanics of the model are quite simple and preliminary, it was our goal to
show the richness of the underlying data structure (NASA data), and the holistic view of the
Austrian economy that can be taken with this model. It was intended to introduce the reader to
the principal logic as well as functioning of the model, and then to demonstrate its capabilities
by the exploratory scenarios.
In comparison to the model presented in Schmelzer (2015), this model has undergone several
improvements:
1. Several asset classes, including a finer depiction of the Austrian financial system
2. A more detailed tax and transfer system
3. Integration of financial accounts, including a first version of portfolio choice and balance
sheet extension of agents.
The exploratory scenarios - even though preliminary in nature and not catered to the current
political discussions in Austria - show basic mechanisms of how tax and other policy measures
transfer to GDP growth and other crucial macroeconomic variables. It was demonstrated how
different tax measures or methods of government expenditure have varying effects on decisive
economic variables such das GDP, consumption, investment, household income, or operating
surplus. We also showed the interaction between changes in tax rates and corresponding adapta-
tions (or the lack of such) of government expenditures, and some of the most important channels
how this policy changes transfer to the main variables of our model economy.
For further work, this preliminary model offers a broad base for extension and further im-
provement, since in already incorporates the full extent of the underlying NASA data structure
and is scalable in the sense that this data structure can be transferred to other countries of
the European Union. Among these points of improvement, extension and further work are the
following:
1. Improved empirical foundations of trends and projections in model parameters, as well as
exogenous variables.
2. Behavioural equations closer related to empirical evidence and economic theory.
3. Endogenous prices and returns for different asset classes, based on supply-demand interac-
tion on financial markets.
4. Based on these prices and returns: a truly endogenous portfolio choice, with expectations
formation by agents. These expectations not necessarily have to correspond the actual
model outcomes in every period due to accounting constraints and behaviour of other
agents not foreseen by the individual actors in the economy.
5. With endogenous prices and expectations formation, the dimension to implement endoge-
nous financial cycles (boom-bust dynamics) in such a model is opened.
6. Improvement of the depiction of interest rates: different assets emitted nationally (“home”
assets) and by the RoW (“foreign” assets) with different interest rates, and a better dis-
aggregation of interest rate payments for the sub-sectors of financial corporations related
        

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