Simulation of an economy with banks and loans to support investment by non fanancial sector businesses.


It is assumed that these business investments are financed 100% by loans, and that all business cash flows are returned to households.


Capital Assets depreciate by an adjustable rate, set initially at 10%.


Business has as a Capital target equal to a factor times prior year GDP. The factor is initially set to 1.


Each year an investment is made in an amount to compensate for depreciation and to add capital at a factor times the difference between target capital and last years capital.



GDP FlowTransactions Matrix




H

F.cur

F.cap

B.cur

B.cap


Σ

2

Consumption

-C

+C





0

3

Investment


+INV

-INV



f

0

5

GDP


[sum]






6

Interest


-INT


+INT


f

0


Wages, Rent & Profits


[sum]






7

Loan Principal Repayment


-PR



+PR

f


8

Wages, Rent &

Distributable Profits

+DH

-DIS

-RE




0

9

Interest from Banks

+HI



-HI



0

10

Profits from Banks

+PB



-PB



0

11

Disposable

[sum]








Change in Loans



+ΔL


L

f

0


Change in Deposits

M




M

f

0


Σ Flows

0

0

0

0

0


0


Book keeping non flow entries







Record changes in capital stock

Kf

+INV - Depreciation


Balance Sheet Matrix




H


F.cap


B.cap


14

Capital

Kh


KfKf



KKf

18

Deposit Accounts

+MD




-MD

0

16

Loans



-L


+L

0


Σ (Net Worth)

NWh


NWf


NMb

KKf