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Flexibility Of Wages And Macroeconomic Instability In An Agent-Based Computational Model With Endogenous Money

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  • Seppecher, Pascal

Abstract

We present a model of a dynamic and complex economy in which the creation and the destruction of money result from interactions between multiple and heterogeneous agents. In the baseline scenario, we observe the stabilization of the income distribution between wages and profits. We then alter the model by increasing the flexibility of wages. This change leads to the formation of a deflationary spiral. Aggregate activity decreases and the unemployment increases. The macroeconomic stability of the model is affected and eventually a systemic crisis arises. Finally, we show that the introduction of a minimum wage would have allowed the aggregate demand to be boosted and to avoid this crisis.

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Bibliographic Info

Article provided by Cambridge University Press in its journal Macroeconomic Dynamics.

Volume (Year): 16 (2012)
Issue (Month): S2 (September)
Pages: 284-297

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Handle: RePEc:cup:macdyn:v:16:y:2012:i:s2:p:284-297_00

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  1. Pascal Seppecher, 2009. "Un modèle macroéconomique multi-agents avec monnaie endogène," Working Papers halshs-00370716, HAL.
  2. Pascal Seppecher, 2010. "Dysfonctionnement bancaire, bulle du crédit et instabilité macroéconomique dans une économie monétaire dynamique et complexe," Revue économique, Presses de Sciences-Po, vol. 0(3), pages 441-449.
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Cited by:
  1. Giovanni Dosi & Giorgio Fagiolo & Mauro Napoletano & Andrea Roventini & Tania Treibich, 2014. "Fiscal and Monetary Policies in Complex Evolving Economies," LEM Papers Series 2014/07, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
  2. Lengnick, Matthias, 2011. "Agent-based macroeconomics - a baseline model," Economics Working Papers 2011,04, Christian-Albrechts-University of Kiel, Department of Economics.
  3. Alessandro Caiani & Antoine Godin & Stefano Lucarelli, 2013. "Innovation and Finance: A Stock Flow Consistent Analysis of Great Surges of Development," INET Research Notes 34, Institute for New Economic Thinking (INET).
  4. Riccetti, Luca & Russo, Alberto & Gallegati, Mauro, 2013. "Unemployment benefits and financial factors in an agent-based macroeconomic model," Economics Discussion Papers 2013-9, Kiel Institute for the World Economy.
  5. Bargigli, Leonardo & Gallegati, Mauro & Riccetti, Luca & Russo, Alberto, 2014. "Network analysis and calibration of the “leveraged network-based financial accelerator”," Journal of Economic Behavior & Organization, Elsevier, vol. 99(C), pages 109-125.
  6. Alessandro Caiani & Antoine Godin & Stefano Lucarelli, 2012. "Innovation and Finance: An SFC Analysis of Great Surges of Development," Economics Working Paper Archive wp_733, Levy Economics Institute, The.
  7. Riccetti, Luca & Russo, Alberto & Gallegati, Mauro, 2012. "An Agent Based Decentralized Matching Macroeconomic Model," MPRA Paper 42211, University Library of Munich, Germany.
  8. Riccetti, Luca & Russo, Alberto & Mauro, Gallegati, 2013. "Financial Regulation in an Agent Based Macroeconomic Model," MPRA Paper 51013, University Library of Munich, Germany.
  9. Antoine Godin, 2012. "Guaranteed Green Jobs: Sustainable Full Employment," Economics Working Paper Archive wp_722, Levy Economics Institute, The.

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