The IDMF (Integrating Dynamic Money-Flow)
Conceptual Framework and its Policy Implications
(brief summary)

Conceptual Framework

The Keynesian analytical and policy framework relies empirically on the National Income and Product Accounts (NIPA), which are conceptually unable to deal with money and credit. Two conceptual innovations of the IDMF conceptual framework make it possible to "complete the Keynesian Revolution" by systematically integrating Flow of Funds Accounts (FOFA) money and credit data with the NIPA income and spending data:

IDMF Macro Equations.  These two conceptual innovations make it possible to replace the traditional Keynesian/NIPA macro equations with a dynamic money-flow equation which is conceptually valid and empirically measurable in both macro and micro levels of aggregation:
Income + Primary Borrowing + New Money
= Spending + Primary Financial Saving + Increase in Money Stock

Policy Implications

Looking Ahead.  To the extent that all countries adopt these policy tools, it will be much easier to coordinate national policies, and even to formulate an integrated international stabilization and growth policy. This has immediate implications for the current plans for European economic integration, and for reversal of the present world recession. Within the next few years this approach could have almost as revolutionry an effect on macroeconomic analysis, policy and teaching as the original Keynesian Revolution had after World War II.

Written: December 1998
Last revised: April 11, 1999
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