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Economic dynamics with financial fragility and mean-field interaction: A model

Author

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  • Di Guilmi, C.
  • Gallegati, M.
  • Landini, S.

Abstract

Following Aoki’s statistical mechanics methodology [Masanao Aoki, New Approaches to Macroeconomic Modeling, Cambridge University Press, 1996; Masanao Aoki, Modeling Aggregate Behaviour and Fluctuations in Economics, Cambridge University Press, 2002; Masanao Aoki, and Hiroshi Yoshikawa, Reconstructing Macroeconomics, Cambridge University Press, 2006], we provide some insights into the well-known works of [Bruce Greenwald, Joseph Stiglitz, Macroeconomic models with equity and credit rationing, in: R. Hubbard (Ed.), Information, Capital Markets and Investment, Chicago University Press, Chicago, 1990; Bruce Greenwald, Joseph Stiglitz, Financial markets imperfections and business cycles, Quarterly journal of Economics (1993)]. Specifically, we reach analytically a closed form solution of their models overcoming the aggregation problem. The key idea is to represent the economy as an evolving complex system, composed by heterogeneous interacting agents, that can be partitioned into a space of macroscopic states. This meso level of aggregation permits to adopt mean-field interaction modeling and master equation techniques.

Suggested Citation

  • Di Guilmi, C. & Gallegati, M. & Landini, S., 2008. "Economic dynamics with financial fragility and mean-field interaction: A model," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 387(15), pages 3852-3861.
    • Handle: RePEc:eee:phsmap:v:387:y:2008:i:15:p:3852-3861
    DOI: 10.1016/j.physa.2008.01.048
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    Cited by:

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    2. Ramis Khabibullin & Alexey Ponomarenko, 2022. "An empirical behavioral model of household’s deposit dollarization," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 17(3), pages 827-847, July.
    3. Tohmé, Fernando & Larrosa, Juan M.C., 2016. "Architectures engender crises: The emergence of power laws in social networks," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 450(C), pages 305-316.

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