Abstract for: Modeling the global macroeconomic system for next generation world-Earth models: The economy of FRIDA v1.1

This work presents a new model of a global macroeconomic system which endogenously tracks the flow of money. The model presented here is a key part of a larger effort to build a new socio ecological model capturing the two-way causal connections between people and planet, FRIDA v1.0. This economic model emphasizes finance-mediated credit as a central driver of economic growth. It contains a fully endogenous circular flow, which allows for a fully endogenous model of government spending as a function of taxation and government debt. The model produces oscillations due to credit cycles and business cycles, and these dynamics are influenced in a mechanistic way by climate, allowing for a processes-based representation of climate damage. This work demonstrates the model’s behavioral validity by calibrating to the three major components of GDP modeled (consumption, investment, and government spending). While the model is a novel approach, and improves the state of the art, it is not a finished product. More structure is needed to represent a larger portion of the real economy.