From Deposits to Overdrafts: Dynamic Portfolio Adjustment and Financial Fragility in a Sraffian Supermultiplier Stock‐Flow Consistent Model

ABSTRACT This paper develops a Sraffian Supermultiplier Stock–Flow Consistent (SSM‐SFC) model in which the growth of government expenditure anchors long‐run demand‐led growth. It replaces Tobin‐style desired stocks with dynamic portfolio adjustment: households rebalance deposits, equities, and overdrafts as interest rates, expected yields, capital gains, and liquidity conditions change. The resulting deposits‐to‐overdrafts shift endogenously generates consumer debt and influences equity valuation and share issuance, as well as the paths of income distribution and public debt. The framework traces these balance‐sheet movements to firms' capital structure, banks' profitability and net worth, and government stock–flow dynamics, along both the traverse and the long run.