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GENERAL EQUILIBRIUM OF A REGIONAL ECONOMY WITH A FINANCIAL SECTOR–PART II: A SIMPLE BEHAVIORAL MODEL
Author(s) -
Hughes Merritt
Publication year - 1992
Publication title -
journal of regional science
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.171
H-Index - 79
eISSN - 1467-9787
pISSN - 0022-4146
DOI - 10.1111/j.1467-9787.1992.tb00166.x
Subject(s) - economics , debt , general equilibrium theory , simple (philosophy) , financial sector , macroeconomics , multiplier (economics) , balance sheet , economic sector , sector model , monetary economics , economy , finance , ecology , philosophy , epistemology , biology , agriculture
. Simple behavioral assumptions are incorporated into an accounting framework that provides linked budget and balance sheets for sectors of a regional economy. A short‐run Keynesian‐type model is developed where quantities rather than prices adjust, and where regional prices and interest rates are equal to national levels. The analysis highlights the importance of the financial services sector as an active factor in regional growth. Consumer deposit and debt preferences, and limitations imposed on credit extension by the financial services sector can have important effects on the regional economy as evidenced by changes in the export multiplier.