Is It Possible to Visualise Any Stock Flow Consistent Model as a Directed Acyclic Graph?
Yes it is. We rigorously demonstrate the equivalence of any stock flow consistent (SFC) model to a directed acyclic graph (DAG) using condensation graphs. The equivalence between stock flow models and DAGs is useful both for visualising large-scale macroeconomic models of this type and for inferring causality within these models. We developed a new package to build and simulate any SFC model and generate the corresponding DAGs, and we provide an example of this package using a well known model from the literature.
KeywordsStock flow consistent models Directed graphs Macroeconomic modeling
JEL ClassificationE01 E12 E17
We thank Dan Neilsen and Oliver Burrows for useful comments on an earlier draft. Kinsella gratefully acknowledges the support of the Institute for New Economic Thinking under grant number INO1300030.
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