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The Flow of Funds in Theory and Practice

A Flow-Constrained Approach to Monetary Theory and Policy

  • Book
  • © 1987

Overview

Authors:
  1. Jacob Cohen

    1. University of Pittsburgh, USA

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Part of the book series: Financial and Monetary Policy Studies (FMPS, volume 15)

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Table of contents (15 chapters)

  1. Front Matter

    Pages I-VIII
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  2. Introduction

    • Jacob Cohen
    Pages 1-2

  3. The Transaction: The Basic Building Block

    • Jacob Cohen
    Pages 3-29

  4. Equilibrium

    • Jacob Cohen
    Pages 30-57

  5. Disequilibrium

    • Jacob Cohen
    Pages 58-78

  6. Money and Banking in the Flow of Funds

    • Jacob Cohen
    Pages 79-92

  7. The Degree of Netness: Stocks vs. Flows

    • Jacob Cohen
    Pages 93-102

  8. Policy Implications

    • Jacob Cohen
    Pages 103-120

  9. The Flow-of-Funds Accounts

    • Jacob Cohen
    Pages 121-162

  10. Simple Model Building: The Sector and Transaction Identities

    • Jacob Cohen
    Pages 163-180

  11. Flow-Flow Models

    • Jacob Cohen
    Pages 181-195

  12. A Stock Market Model

    • Jacob Cohen
    Pages 196-209

  13. Portfolio Balance Models

    • Jacob Cohen
    Pages 210-250

  14. Disequilibrium Models

    • Jacob Cohen
    Pages 251-275

  15. “Direct Linkage” Policy Models

    • Jacob Cohen
    Pages 276-301

  16. The Strength and Limitations of Flow-of-Funds Analysis

    • Jacob Cohen
    Pages 302-309

  17. Back Matter

    Pages 310-343
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Keywords

About this book

The central emphasis in the book is on the transaction and the constraints that its architecture imposes on a discussion of monetary theory and policy. Because of their comprehensiveness and discipline the flow-of-funds accounts are the ideal vehicle for theorizing about real and financial interaction. Such int- action can best be understood when real and financial transac­ tions are expressed in a common flow dimension. Each decision by economic agents is seen as two-ended in terms of markets: one market supplies the source of funds and the second market absorbs these funds. A matrix of interdependent markets is featured throughout the theoretical discussion. Credit markets, and the bank credit market in particular, become the source of disturbance in the theoretical model, but the necessary involve­ ment of the money market is also stressed. Theories of finan­ cial instability and crisis now receiving considerable attention are part of the more general theory of the flow of funds. The rationale for the monetary authority to target credit rather than the monetary aggregates emerges from the analytical discus­ sion. A flow-constrained analysis clarifies interest-rate deter­ mination, provides a helpful format for discussing equilibrium and disequilibrium, integrates credit markets with the familiar IS-LM framework, and identifies a class of missing equations in macro-monetary theory. The prototype of the missing equations is an equation explaining monetary dissaving in terms of a series of arguments only one of which will be the stock of real balances or real wealth.

Authors and Affiliations

  • University of Pittsburgh, USA

    Jacob Cohen

Bibliographic Information

  • Book Title: The Flow of Funds in Theory and Practice

  • Book Subtitle: A Flow-Constrained Approach to Monetary Theory and Policy

  • Authors: Jacob Cohen

  • Series Title: Financial and Monetary Policy Studies

  • DOI: https://doi.org/10.1007/978-94-009-3675-1

  • Publisher: Springer Dordrecht

  • eBook Packages: Springer Book Archive

  • Copyright Information: Martinus Nijhoff Publishers, Dordrecht. 1987

  • Hardcover ISBN: 978-90-247-3601-0Due: 30 November 1987

  • Softcover ISBN: 978-94-010-8145-0Published: 21 September 2011

  • eBook ISBN: 978-94-009-3675-1Published: 06 December 2012

  • Series ISSN: 0921-8580

  • Series E-ISSN: 2197-1889

  • Edition Number: 1

  • Number of Pages: VIII, 343

  • Topics: Macroeconomics/Monetary Economics//Financial Economics

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