Volume of the steady-state space of financial flows in a monetary stock-flow-consistent model

TL;DR

This paper models a macroeconomic system as a constraint satisfaction problem, analyzing the volume of its solution space to assess economic fragility without studying dynamics.

Contribution

It introduces a novel approach to evaluate economic stability by representing steady-state models as polytopes and comparing methods to compute their volume.

Findings

Solution space volume indicates potential fragility of the economic system.

Comparison of exact and approximate methods for volume computation.

Analysis of linear flows with respect to money stocks.

Abstract

We show that a steady-state stock-flow consistent macro-economic model can be represented as a Constraint Satisfaction Problem (CSP).The set of solutions is a polytope, which volume depends on the constraintsapplied and reveals the potential fragility of the economic circuit,with no need to study the dynamics. Several methods to compute the volume are compared, inspired by operations research methods and theanalysis of metabolic networks, both exact and approximate.We also introduce a random transaction matrix, and study the particularcase of linear flows with respect to money stocks.