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Revisiting "New Cambridge": The Three Financial Balances In A General Stock-Flow Consistent Applied Modeling Strategy

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Executive Summary

This paper argues that modified versions of the so-called "New Cambridge" approach to macroeconomic modeling are both quite useful for modeling real capitalist economies in historical time and perfectly compatible with the "Vision" underlying modern Post-Keynesian stock-flow consistent macroeconomic models. As such, New Cambridge - type models appear to the authors as an important contribution to the tool kit available to applied macroeconomists in general, and to heterodox applied macroeconomists in particular. Anyone who has tried to read through a modern Post-Keynesian SFC model knows that these constructs tend to assume very many behavioral assumptions. Some of the assumed behavioral parameters are less difficult to estimate than others.

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