Stephen Kinsella

Agent Based-Stock Flow Consistent Macroeconomics: Towards a Benchmark Model

The global financial crisis has forced standard macroeconomics to re-examine the plausibility of its assumptions and the adequacy of the policy prescriptions flowing from those assumptions. We believe a renewal of macroeconomic thinking and macroeconomic modeling is possible by recognizing that our economies should be analyzed as complex adaptive systems. A coherent and exhaustive representation of the inter-linkages between the real and financial sides of the economy is vital as well. We propose a macroeconomic framework based on a novel combination of the Agent Based and Stock Flow Consistent approaches. This paper presents a benchmark model for this innovative approach. Our model depicts an economy with capital and credit in which different types of agents locally interact on different markets. We provide a detailed representation of individual agents’ balance sheets, ensuring the model accounting consistency at the micro, meso, and macro levels. We analyze the properties of our simulated economy under different configurations of agent heuristics, focusing in particular on the role of credit and investment. We explain in detail the logic followed to calibrate and validate the model. Results show that our benchmark model is able to reproduce many stylized facts observed in real world, thus representing a good starting point to test -- in the next works -- different economic policies and institutional setups. Finally, the relatively simple and flexible structure of the model opens up many possibilities for development of the framework along different lines, thus providing a fertile soil for new applications.

Many to one: Using the mobile phone to interact with large classes

The article focuses on the use of mobile phones by lecturers to communicate with large groups of students and the development of a software application which allows a student to send a text message anonymously and the teachers answer to be seen in real time by all the students. The use of mini-summaries within the lecture before moving on to a different topic, the effectiveness of instant feedback in university teaching as well as the two categories of feedback, and the modifications needed in the lecture format to control the flow of messages.

Peer Effects in the Diffusion of Innovations: Theory and Simulation

This paper presents a theoretical framework for studying peer effects in the diffusion of innovations. The underlying mechanisms of peer effects are generally under-discussed in existing studies. By investigating diffusion processes in the real world and reviewing previous studies, we find that information transmission, experience sharing and externalities are the basic mechanisms through which peer effects occur. They are termed as information effect, experience effect and externality effect, respectively. The three effects could occur through different types of relationships in a social network. Each of them plays a different role at different stages of a diffusion process. A simulation model incorporating multiple effects in a multiplex network is developed to provide a theoretical study. We simulate the experience effect and the externality effect in a context of rural diffusion. It generates the widely acknowledged patterns of diffusion in various scenarios. The experiments conducted using the model show that peer effects as a whole can be substantially misestimated if the underlying mechanisms are ignored.

Legal Protection of Investors, Corporate Governance, and Investable Premia in Emerging Markets

We examine the interaction between the legal protection of investors, corporate governance within firms, institutional development between countries, and investable premia in emerging markets. In a multi country setting and using a novel dataset we find that better-governed firms experience significantly greater stock price increases upon equity market liberalization. We look to see whether well-governed firms in poorly governed countries enjoy an investability premium as measured by Tobin’s q. We find they do. Investors look beyond the seemingly weak country-level governance structures, and focus on corporate governance.

Leverage, liquidity and crisis: A simulation study

We study the interactions of banks and ?rms within a leverage cycle to understand how capacity utilisation and capital investment interact with funding costs, leverage by banks and ?rms, and liquidity. We show in a simulation study that when ?rms can grow and die by becoming insolvent, and when banks can grow and die as their bad debts increase to unsustainable levels, the real economy cycles around a leverage cycle.

Clinical efficacy and economic evaluation of online cognitive behavioral therapy for major depressive disorder: a systematic review and meta-analysis

ABSTRACT Introduction: Leading cause of disability worldwide, depression is the most prevalent mental disorder with growing societal costs. As mental health services demand often outweighs provision, accessible treatment options are needed. Our systematic review and meta-analysis evaluated the clinical efficacy and economic evidence for the use of online cognitive behavioral therapy (oCBT) as an accessible treatment solution for depression. Areas covered: Electronic databases were searched for controlled trials published between 2006 and 2016. Of the reviewed 3,324 studies, 29 met the criteria for inclusion in the efficacy meta-analysis. The systematic review identified five oCBT economic evaluations. Therapist-supported oCBT was equivalent to face-to-face CBT at improving depressive symptoms and superior to treatment-as-usual, waitlist control, and attention control. Depression severity, number of sessions, or support did not affect efficacy. From a healthcare provider perspective, oCBT tended to show greater costs with greater benefits in the short term, relative to comparator treatments. Expert commentary: Although efficacious, further economic evidence is required to support the provision of oCBT as a cost-effective treatment for depression. Economic evaluations that incorporate a societal perspective will better account for direct and indirect treatment costs. Nevertheless, oCBT shows promise of effectively improving depressive symptoms, considering limited mental healthcare resources.

Pedagogical approaches to theories of endogenous versus exogenous money

Pedagogical pluralism is difficult to implement in practice. This paper contrasts two approaches to the modelling of money in macroeconomics: the stock-flow consistent macroeconomic model of Godley and Lavoie and the mainstream neoclassical dynamic general equilibrium model of Barro. Students can contrast and compare approaches effectively when thematic overlaps are significantly large to make comparisons obvious. Only then should a pluralist approach be considered desirable.

A dynamic model of financial balances for the United Kingdom

We construct a new scenario analysis model for the United Kingdom using ONS data from 1987 to the present. The model links decisions about real variables to credit creation in the financial sector and decisions about asset allocation among investors for a wide array of financial assets. We develop, estimate, and calibrate the model from first principles as well as describing the stock-flow coherent database we construct to validate the model. We impose several scenarios on the model to test its usefulness as a medium term scenario analysis tool, including increases in banks’ capital ratios, sudden stops, changes in investment, increases in house prices and fiscal expansions.

The Roles of Financial Threat, Social Support, Work Stress, and Mental Distress in Dairy Farmers’ Expectations of Injury

Farming is dangerous, with fatalities among the highest in any occupation. Farmers often work alone, for long hours, with unreliable equipment and in difficult weather conditions with hazardous chemicals and livestock. In addition, farmers make large financial commitments exposing them to high levels of financial risk. Exposure to such financial risk can give rise to subjective experiences of financial threat (FT) that are psychologically challenging. The current study attempted to characterize the role that FT plays in farm injuries. One hundred and twenty one dairy farmers completed a battery of questionnaires assessing FT, social support (SS), depression, anxiety, farm job stress, and health and safety beliefs. Mental distress directly predicted farmers’ expectations of injury and a direct effect of non-financial farm stress (FS) approached significance. Mental distress mediated these relationships as evidenced by significant indirect effects of FS and FT, and SS served to reduce distress. These findings support calls for interventions designed to reduce FS and FT and increase SS for farmers.

Was Ireland’s Celtic Tiger Period Profit-Led or Wage-Led?

This paper examines the macroeconomic performance of the Irish economy in the years leading up to the Celtic Tiger period and afterward, from 1980 to 2011. The goal of the paper is to determine how a severe recession in the 1980s could be followed so quickly by the unprecedented boom years of the Celtic Tiger, and followed again by the marked economic downturn since 2007. I build a Keynesian model of growth that integrates effective demand and productivity regimes to allow for the possibility that a redistribution of income can either spur or retard growth, depending on whether the regime is wage-led or profit-led. Using data for the Irish economy I test this model for wage-led or profit-led growth, finding plausible evidence that the Celtic Tiger years were, in fact, profit led.