tag:blogger.com,1999:blog-5908830827135060852.post2499806615947513178..comments2024-03-01T02:40:14.946-05:00Comments on Bond Economics: Primer: Understanding Stock – Flow NormsBrian Romanchukhttp://www.blogger.com/profile/02699198289421951151noreply@blogger.comBlogger22125tag:blogger.com,1999:blog-5908830827135060852.post-12048945404007059102021-02-05T04:13:28.699-05:002021-02-05T04:13:28.699-05:00This comment has been removed by a blog administrator.GhaziiSEO grhttps://www.blogger.com/profile/13917254617036872524noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-71659220278591602252020-12-10T07:19:31.583-05:002020-12-10T07:19:31.583-05:00This comment has been removed by a blog administrator.Publish your passionshttps://www.blogger.com/profile/07644298282011483992noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-8619205734107206152020-11-02T05:41:02.499-05:002020-11-02T05:41:02.499-05:00This comment has been removed by a blog administrator.Marie Bowmanhttps://www.blogger.com/profile/17244903382658920281noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-20260719513941603502020-11-01T06:14:03.158-05:002020-11-01T06:14:03.158-05:00This comment has been removed by a blog administrator.nidahttps://www.blogger.com/profile/17941327925934234441noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-69239241972025531782020-10-27T06:45:36.795-04:002020-10-27T06:45:36.795-04:00This comment has been removed by a blog administrator.shaikhhttps://www.blogger.com/profile/01912981372883542843noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-29757387988819264472020-10-21T05:48:43.796-04:002020-10-21T05:48:43.796-04:00This comment has been removed by a blog administrator.Marie Bowmanhttps://www.blogger.com/profile/17244903382658920281noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-77539900433188504822020-09-14T01:32:04.442-04:002020-09-14T01:32:04.442-04:00This comment has been removed by a blog administrator.seostar2https://www.blogger.com/profile/14360034632558791561noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-12242506773864346492020-06-11T06:35:11.267-04:002020-06-11T06:35:11.267-04:00This comment has been removed by a blog administrator.markthomsonhttps://www.blogger.com/profile/18191523150893675707noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-87586490652340044052017-10-04T05:46:02.309-04:002017-10-04T05:46:02.309-04:00This comment has been removed by a blog administrator.Mark Robertshttps://www.blogger.com/profile/11987642111220555555noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-43435545345688017922017-04-24T13:53:50.668-04:002017-04-24T13:53:50.668-04:00This comment has been removed by a blog administrator.Mueeid Soomrohttps://www.blogger.com/profile/15577809287812278966noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-31086847274800236292015-08-20T19:01:42.628-04:002015-08-20T19:01:42.628-04:00The ratios are hard to interpret, but I guess they...The ratios are hard to interpret, but I guess they can be useful under some circumstances. I do not think you can conclude too much about them, without adding other qualifiers. For example, debt-to-income (with GDP being national income) ratios are affected by growth rates; the ratios tend to be higher when nominal growth rates are low.Brian Romanchukhttps://www.blogger.com/profile/02699198289421951151noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-51943034939064556242015-08-20T17:45:00.698-04:002015-08-20T17:45:00.698-04:00Im sorry for my question but my mind got so blurry...Im sorry for my question but my mind got so blurry.<br />It is possible that stock over flow ratios keep rising altough the flow variable rise fast. So wouldnt it be meaningless to interpret this ratios? or would it be a trouble to adobt this ratios in an empirical model?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-58787893420106341672014-09-15T06:55:00.103-04:002014-09-15T06:55:00.103-04:00You are correct, I updated the text. I was spendin...You are correct, I updated the text. I was spending so much time deciding how to format the equation in a text editor that apparently I didn't bother double-checking what I wrote. Brian Romanchukhttps://www.blogger.com/profile/02699198289421951151noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-31554726309236430682014-09-14T22:38:06.547-04:002014-09-14T22:38:06.547-04:00"If we substitute the consumption equation in..."If we substitute the consumption equation into previous, we get:<br /><br />ΔW = s*I - d*W.<br /><br />We can then recast this to:<br /><br />ΔW =I/d*(s/d - W/I)."<br /><br />I am wondering if there is a typo here. When I multiply the top equation by 1/d*I and rearrange, I come up with<br /><br />ΔW =I*d*(s/d - W/I).<br /><br />Thanks for the thought-provoking blog post.<br />Roger Sparkshttps://www.blogger.com/profile/01734503500078064208noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-44625434814353972182014-09-11T17:35:28.585-04:002014-09-11T17:35:28.585-04:00I may have to look at the wording again, but the i...I may have to look at the wording again, but the idea is that a transaction in a monetary economy consists of<br />(a) Person A gives $100 to Person B [monetary side]<br />(b) Person B provides a service to Person A. [real economy side]<br /><br />The (a) side is associated with a change in monetary stocks. But on the (b) side, there is no stock of "services". If Person B provided something tangible like a television, then the number of televisions in a stock variable - inventory - would change. <br /><br />As for your example, a government purchase will add to GDP, and it will also result in a change in government liabilities. These transactions will show up in two sets of related but distinct accounting frameworks - the GDP accounts, and the Flow of Funds (financial flows). <br /><br />However, not all government spending will directly add to GDP, and so there are limits to the mechanical link between government spending and GDP. For example, a transfer payment to a retired person does not add to GDP, but it would expand government liabilities. But if that person then spends the money, that spending would add to GDP (personal consumption), but even that would be reduced if the spending reduced inventories (which is a negative investment). Brian Romanchukhttps://www.blogger.com/profile/02699198289421951151noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-60562814544794443142014-09-11T16:29:22.072-04:002014-09-11T16:29:22.072-04:00"However, there are no stocks associated with..."However, there are no stocks associated with transactions in services." <br /><br />(I think this is a late addition as a result of the Ramanan comment.)<br /><br />This wording creates a worry for me because the stock of money does still change for each party to the transaction. I think you intend that the money stock change would be an unstated and automatic assumption<br /><br />This is an important point for me BECAUSE I believe that new government debt first appears as a change to GDP AND TO THE MONEY SUPPLY when government first pays for labor (a service). If this is correct, then the stock of money increases when time (the essence of service) is traded for new money.<br /><br />I would agree that if a person already has money, the trade of money for service is a trade of money stock for time but no new money nor average stock measure is changed.Roger Sparkshttps://www.blogger.com/profile/01734503500078064208noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-48820589841863708422014-09-11T10:25:47.992-04:002014-09-11T10:25:47.992-04:00Even in a closed economy, the government debt-to-G...Even in a closed economy, the government debt-to-GDP ratio will change if there is a change in the distribution of income. In fact, that's what my next SFC article will be about. This article is meant as a basic explanation of the dynamics of one sub-sector of the economy, without worrying about the interaction with other sectors. My comments on the government debt-to-GDP ratio were more an indication of why this matters, without getting too far into the details. Brian Romanchukhttps://www.blogger.com/profile/02699198289421951151noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-82668036094232914952014-09-11T09:19:39.015-04:002014-09-11T09:19:39.015-04:00Thanks, it was awhile since I read the text, and h...Thanks, it was awhile since I read the text, and had not noted that example. When I look at it, it appears the mechanism would be the fact that behaviour is driven by real parameters, and not parameters on nominal quantities, such as I used. I did note that a more complex specification could lead to a stable debt-to-GDP ratio, but I will add the reference. However, my view is that the inverse dependence upon nominal growth rates fits the data better, wven if it does not match the priors of economists.Brian Romanchukhttps://www.blogger.com/profile/02699198289421951151noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-71281431814334885842014-09-11T09:17:39.091-04:002014-09-11T09:17:39.091-04:00(Sorry if this appears multiple times)
Also don&#...(Sorry if this appears multiple times)<br /><br />Also don't forget that in open economies, the point on stock-flow norms can work the reverse. It is quite possible that output rises fast but debt/gdp keeps rising. <br /><br />So there is no general principle about stock-flow norms and growth. Ramananhttp://www.concertedaction.comnoreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-14111704231680678992014-09-11T09:13:34.930-04:002014-09-11T09:13:34.930-04:00Thanks, I will take a look at re-writing that. My ...Thanks, I will take a look at re-writing that. My thinking was t focus on the monetary side of the transaction, the flows would result in a change of balance sheet entries. The other side of the transaction would be harder to characterise. I did not want to write a 300 word definition of what stocks and flows are within a 1000 word description of stock-flow norms. I'll probably link to a better description,Brian Romanchukhttps://www.blogger.com/profile/02699198289421951151noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-21731093874683950342014-09-11T07:23:04.358-04:002014-09-11T07:23:04.358-04:00Also about your main point on stock-flow norms, ca...Also about your main point on stock-flow norms, can you see Sec 11.7.3 of Godley/Lavoie's book and Fig 11.3C? There the government debt to GDP doesn't seem to change in the long run. (Although the expression at the end of the chapter has the norm depending on the growth rate). Ramananhttp://www.concertedaction.comnoreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-23502684904833750392014-09-11T07:07:32.996-04:002014-09-11T07:07:32.996-04:00"A stock variable is an economic variable tha..."A stock variable is an economic variable that is a quantity (and not a parameter) that is measured at the end of a accounting period. For example, variables that would appear on the balance sheet, such as money holdings or inventory at the end of the month.<br /><br />A flow variable is an economic variable that is the change of a stock variable during accounting period. For example, variables that would appear on income statements."<br /><br />That's an incomplete description of flows because not all flows are changes in stocks, although flows affect changes in (other) stocks. For example, consider consumption: it is not a change in the stock of anything. Also GDP itself: it is not the change in the stock of something. <br /><br />To see this consider a pure service economy. The output is not a change of the stock of something, although the output is a flow. Ramananhttp://www.concertedaction.comnoreply@blogger.com