The Conceptual and Analytical Framework
Annotated List of Documents
The Conceptual and Analytical Framework
for Macroeconomic Science and Policy
(to Site Map
IEA's innovative conceptual framework, the Integrating Dynamic Money Flow (IDMF) model, makes it possible to "complete the Keynesian Revolution" by functionally integrating the National Income and Product (NIPA) and Flow-of-Funds (FOF) national accounts, empirically linking financial saving and GDP investment -- thus bridging the financial gap between saving and investment.
IEA has also developed an innovative analytical framework that we have found to be more rational, transparent, and revealing of underlying trends and relationships than the black-box econometric approaches in general use today. This framework involves a growth (rather than static) frame of reference, using a graphical, normative approach to data and a more rational set of definitions of economic fluctuations than is currently in use.
A comprehensive economic database based on this conceptual/analytical framework would provide the empirical basis for a more credible and easier to understand macroeconomic science, more effective analytical tools, and more systematic coordination of policy tools for maintaining stable full-employment growth, low inflation, low interest rates, a more equitable and sustainable distribution of income and wealth, and a more stable stock market.
- "Visual Analysis" Graphic Summary of the IDMF's Main Elements
Diagrams and equations for those who like to think in visual terms -- "One picture is worth a thousand words."
- The IDMF Circular Money-Flow Diagram.
- Saving/Investment Money-Flows Table/diagram.
- Full-Employment Growth-Trend Standard of Reference for Analyzing Economic Fluctuations.
- Macro Structural Analysis -- "pile-up" charts.
- The Integrating Dynamic Money Flow (IDMF) Model
These texts have some duplication because they were written at different times for different purposes, but are included here for their different focuses.
- Briefest Text Summary (revised 4/11/99)
- Completing the Keynesian Revolution (revised 4/15/99)
How the empirical "financial gap" in traditional Keynesian analysis is caused by its link to the National Income and Product Accounts (which are unable to deal with money and credit), and a brief summary of the IDMF conceptual framework for fully integrated economic accounts, analysis and policy.
- The IDMF Conceptual Framework and its Policy Implications (revised 4/21/99)
This brief summary was written in July, 1998, as an IDMF introduction to the article, "Rx for the Japanese Economy," now posted here in the section on "Current Public Policy Issues -- World Economic Recovery."
- Toward the Integration of Economic Science (1990)
This is the most comprehensive on-line presentation of the IDMF framework.
- Static vs. Flow Perspective in Flow-of-Funds Accounts and Financial Analysis
This was the first published description of the this conceptual model. Written during the 1959 CRIW conference on "The Flow of Funds Approach to Social Accounting," it was published by the NBER in 1962. (See IEA history.)
- Key Analytical Errors in Keynesian Theory (9/58, not yet scanned on-line.)
- Most business plant & equipment investment is financed internally by depreciation and retained profits. The chief "outlet" for "other people's" financial saving is consumer investment in houses and cars.
- Monetary expansion, not business investment, is the key exogenous and "multiplier" factor in GDP growth.
- Because of its conceptual link to the National Income and Product Accounts, with their" financial gap" between saving and investment, Keynesian analysis has to resort to confusing abstract non-empirical concepts like "ex anti/ex post," "propensities," "liquidity preference," and IS/LM curves.
- IDMF Primary Credit Derivation from Flow of Funds Accounts
Illustrative tables using two quarters of 1977 FOFA data.
- The Full-Employment Growth-Trend Standard of Reference
For analyzing fluctuations and managing performance.
- The Full-Employment Growth-Trend Conceptual Framework.
This diagram and these definitions provide more functionally-precise perspective on recession, depression, stagnation and recovery, and recovery-policy implications.
- The NBER/BEA/Conference Board "Leading" Indicators Don't Really "Lead"
For most series the lead is only apparent, not functional. On a conceptually appropriate growth-trend standard of reference they are merely coincident with the economy's operating rate.
- Structural and Dynamic Macroeconomic Equilibrium Analysis
These are different aspects of overall economic balance which must be maintained -- at full-employment levels -- in order to maintain stable, sustainable, full-employment economic growth. There are complex interrelationships among them. But for incisive analysis and effective policy, it is essential to distinguish clearly between them:
- The Current Empirically-Measurable Supply/Demand Balances
- Longer-Run Structural Balances