The Velocity of Money In The Stock-Flow Consistent Model

In this paper we examined the characteristics of monetary velocity within a standard Stock-Flow Consistent Model. The SFC model is an improvable model developed by the Post-Keynesian School, which considers an economy as an integrated system. The system consists of some economic sectors, such as households, firms, commercial banks, government and central bank. Then through the balance sheet and the transaction sheet we can analyze the relationship of the stock and the flow among these sectors. We simulated the evolutions of the velocity under some shocks of parameters or economic policies, like the target inventories to sales ratio, real government expenditures and compulsory reserve ratios et al. The results show that the SFC models can interpret the changes of monetary velocity well.