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Heterogeneity and Aggregation in a Financial Accelerator Model

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Author Info
Assenza, T. () (Universiteit van Amsterdam)
Delli Gatti, D.
Gallegati, M.

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Abstract

In this paper we present a macroeconomic model in which changes in the variance (and higher moments of the distribution) of firm's financial conditions - i.e. "distributive shocks" - are bound to play a crucial role in the determination of output fluctuations. Firms differ by degree of financial robustness, which affects (optimal) investment in a bankruptcy risk context (à la Greenwald-Stiglitz). As to households, for the sake of simplicity, we assume that they are homogeneous in every respect so that we can adopt the representative agent hypothesis. We can explore the properties of the macro-dynamic model either via the study of the two-dimensional map defining the laws of motion of the average equity ratio and of the variance of the distribution or via simulations in a multiagent framework.

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Publisher Info
Paper provided by Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance in its series CeNDEF Working Papers with number 07-13.

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Date of creation: 2007
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Handle: RePEc:ams:ndfwpp:07-13

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Postal: Dept. of Economics and Econometrics, Universiteit van Amsterdam, Roetersstraat 11, NL - 1018 WB Amsterdam, The Netherlands
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  1. Bruce C. Greenwald & Joseph E. Stiglitz, 1990. "Macroeconomic Models with Equity and Credit Rationing," NBER Chapters, in: Asymmetric Information, Corporate Finance, and Investment, pages 15-42 National Bureau of Economic Research, Inc. [Downloadable!]
    Other versions:
  2. Per Krusell & Anthony A. Smith & Jr., 1998. "Income and Wealth Heterogeneity in the Macroeconomy," Journal of Political Economy, University of Chicago Press, vol. 106(5), pages 867-896, October. [Downloadable!] (restricted)
    Other versions:
  3. Greenwald, Bruce C & Stiglitz, Joseph E, 1986. "Externalities in Economies with Imperfect Information and Incomplete Markets," The Quarterly Journal of Economics, MIT Press, vol. 101(2), pages 229-64, May. [Downloadable!] (restricted)
  4. Bruce C. Greenwald & Joseph E. Stiglitz, 1993. "Financial Market Imperfections and Business Cycles," NBER Working Papers 2494, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  5. Altman, Edward I, 1984. " A Further Empirical Investigation of the Bankruptcy Cost Question," Journal of Finance, American Finance Association, vol. 39(4), pages 1067-89, September. [Downloadable!] (restricted)
  6. Gatti, Domenico Delli & Guilmi, Corrado Di & Gaffeo, Edoardo & Giulioni, Gianfranco & Gallegati, Mauro & Palestrini, Antonio, 2005. "A new approach to business fluctuations: heterogeneous interacting agents, scaling laws and financial fragility," Journal of Economic Behavior & Organization, Elsevier, vol. 56(4), pages 489-512, April. [Downloadable!] (restricted)
  7. Leigh Tesfatsion, 2002. "Agent-Based Computational Economics," Computational Economics 0203001, EconWPA, revised 15 Aug 2002. [Downloadable!]
  8. Robert E. Lucas Jr., 1978. "On the Size Distribution of Business Firms," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 508-523, Autumn. [Downloadable!] (restricted)
  9. Kirman, A., 1997. "Interaction and Markets," G.R.E.Q.A.M. 97a02, Universite Aix-Marseille III.
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  10. Delli Gatti, Domenico & Gallegati, Mauro & Giulioni, Gianfranco & Palestrini, Antonio, 2003. "Financial fragility, patterns of firms' entry and exit and aggregate dynamics," Journal of Economic Behavior & Organization, Elsevier, vol. 51(1), pages 79-97, May. [Downloadable!] (restricted)
    Other versions:
  11. Charles T. Carlstrom & Timothy S. Fuerst, 2002. "Imperfect capital markets and nominal wage rigidities," Working Paper 0205, Federal Reserve Bank of Cleveland. [Downloadable!]
  12. M. Gallegati & A. Palestrini & D. Gatti & E. Scalas, 2006. "Aggregation of Heterogeneous Interacting Agents: The Variant Representative Agent Framework," Journal of Economic Interaction and Coordination, Springer, vol. 1(1), pages 5-19, May. [Downloadable!] (restricted)
  13. Roller, Lars-Hendrik & Sinclair-Desgagne, Bernard, 1996. "On the heterogeneity of firms," European Economic Review, Elsevier, vol. 40(3-5), pages 531-539, April. [Downloadable!] (restricted)
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