Method to Simultaneously Determine Stock, Flow, and Parameter Values in Large Stock Flow Consistent Models

Abstract

Stock flow consistent macroeconomic models suffer from the lack of a coherent estimation method due to the complicated nature of the modeling process. This paper provides a candidate estimation method that determines the values of each stock and flow simultaneously by analytically solving any stock flow model, and converting the estimation into a global minimization problem in p − k dimensions. We describe the method and apply it to a canonical model using real-world data. The method estimates the parameters and flows reliably.