A Stock-Flow-Fund Ecological Macroeconomic Model

Posted: 14 Apr 2017 Last revised: 3 Nov 2017

See all articles by Yannis Dafermos

Yannis Dafermos

SOAS University of London

Maria Nikolaidi

University of Greenwich

Giorgos Galanis


Date Written: 2017


This paper develops a stock-flow-fund ecological macroeconomic model that combines the stock-flow consistent approach of Godley and Lavoie with the flow-fund model of Georgescu-Roegen. The model has the following key features. First, monetary and physical stocks and flows are explicitly formalised taking into account the accounting principles and the laws of thermodynamics. Second, Georgescu-Roegen's distinction between stock-flow and fund-service resources is adopted. Third, output is demand-determined but supply constraints might arise either due to environmental damages or due to the exhaustion of natural resources. Fourth, climate change influences directly the components of aggregate demand. Fifth, finance affects macroeconomic activity and the materialisation of investment plans that determine ecological efficiency. The model is calibrated using global data. Simulations are conducted to investigate the trajectories of key environmental, macroeconomic and financial variables under (i) different assumptions about the sensitivity of economic activity to the leverage ratio of firms and (ii) different types of green finance policies.

Keywords: Ecological Macroeconomics, Stock-Flow Consistent Modelling, Laws of Thermodynamics, Climate Change, Finance

JEL Classification: E10, E12, E44, Q54, Q57

Suggested Citation

Dafermos, Yannis and Nikolaidi, Maria and Galanis, Giorgos, A Stock-Flow-Fund Ecological Macroeconomic Model (2017). Ecological Economics, Vol. 131, pp. 191-207, 2017, Available at SSRN: https://ssrn.com/abstract=2951163

Yannis Dafermos (Contact Author)

SOAS University of London ( email )

Thornhaugh Street
Russell Square
London, WC1H 0XG
United Kingdom

Maria Nikolaidi

University of Greenwich ( email )

30 Park Row
London, SE10 9LS
United Kingdom

Giorgos Galanis

Independent ( email )

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