RunTheModel - Godley & Lavoie Model SIM

Godley & Lavoie Model SIM

This is a System Dynamics based simulation of Godley & Lavoie's SIM model (Godley & Lavoie, 2007, p.57ff.). It is their simplest
model with government supplied high-powered money (H). G&L;'s models are Stock-Flow Consistent (SFC) macroeconomic models
consisting of quadruple-entry accounting whereby all flows of money are accounted-for between counterparties and also ensuring
balance sheet consistency. All money circulating in the economy has to come fr om somewhere and has to go somewh ere; this addresses
a fundamental  problem of orthodox macroeconomic modelling which does not account for monetary flows appropriately.

In this model, money enters the circular-flow (or circuit) via government spending of 'printed'  'High-powered' money to buy services
from producers. The stock of printed money is accounted for as government 'debt' on the balance sheet (although it  pays zero interest).
The flows of money between sectors and between income statements and balance sheets of wealth are driven by behavioural equations.
The producers immediately pay all of their income in wages. Consumers then choose how much money to spend and how much to save
from their after-tax income (and wealth).

The model user can manipulate exogenous parameters to simulate various model outcomes and steady-states, including fiscal boosts
and 'austerity' drives. The model provides a useful introduction to both SFC and SD modelling and demonstrates some counterintuitive
results, e.g. that if consumers wish to accumulate monetary wealth by reducing current consumption, the government is forced to
accomodate by expanding its deficit and hence its national 'debt'.

Please send suggestions for improving the simulator to:  [email protected]      Twitter: @NelsonSmythe

Reference:
Godley, W. & Lavoie, M. (2007) Monetary Economics: An Integrated Approach to Credit, Money, Income, Production and Wealth.
Basingstoke: Palgrave Macmillan.