Re: flow or stock?

[Alan G Isaac <aisaac@xxxxxxxxxxxx>]

On Thu, 01 Aug 2002 13:53:11 +0900 Kazuhiro Kurose <kurose@xxxxxxxxxxxxxxxxxxxxxx> wrote:
> I have a question again. It is concerned with the distinction of flow and
> stock. The notion of saving is categorized into a flow variable, therefore
> a certain quantity of money as a part of saving is also categorized into a
> flow. On the other hand, a certain quantity of money, which has previously
> accumulated at the beginning of the period, is categorized into a stock
> variable. In addition to money as a stock, we have the notion of securities
> as stock in the sense of outstanding. The securities as stock can be traded
> in a market. When they are sold in market, their owners receive money
> instead of giving securities. What I'd like to know is whether money which
> can be received as a result of selling outstanding securities should be
> regarded as flow or stock.
> Please give me a piece of advice!

Since you write from a graduate school I trust a terse answer will do.
The easiest way to pin down the stock/flow distinction is to formulate
your model in continuous time and then ask whether a variable
definition must include a period of time over which the flow must
occur.  (E.g., saving per year, vs. the supply of money at time t.)
When you apply what you learn this way to clarify your understanding
in the discrete time case, where it is possible to describe flows so
that they superficially appear to be stocks by implicitly invoking
a fixed time period, your question should be answered.

Cheers,
Alan Isaac