Authors: Amelia Correa; Romar Correa
Addresses: Department of Economics, St Andrew's College, Mumbai, 400 098, India ' Department of Economics, University of Mumbai, Mumbai, 400 098, India
Abstract: We construct generic balance sheets for the USA and a developing country. The stock-flow-consistent (SFC) framework is drawn from the Godley and Lavoie (2007) compendium. The stylised US matrix is completely financialised. The liabilities of financial institutions (FIs) are equity and their assets are the equity offerings of firms and households. Households are rentiers holding the equity of both the entities. The government oversees the operation of SFC norms. The input-output system of the developing economy is a contrast. Banks 'originate and hold' credit lines which are utilised to employ workers on projects. The private money created thereby is underwritten by state money. We consider the imperialism of the US balance sheet accounting practices on the developing country balance sheet. In particular, what are the implications for stability when 'originate and hold' transforms into 'originate and distribute' financial relationships?
Keywords: financialisation; patient capital; commodity production; Federal Reserve; Wall Street; USA; United States; developing countries; stock flow consistent; SFC; accounting practices; balance sheets; equity; bank credit.
International Journal of Economics and Accounting, 2016 Vol.7 No.3, pp.175 - 188
Received: 23 Feb 2016
Accepted: 18 May 2016
Published online: 21 Oct 2016 *