Financial Fragility and Macroeconomic Instability in a Heterogeneous Interacting Agents Framework
AbstractA financial crisis can have important effects on the real economy. The more financially fragile are agents the more likely is the occurrence of a financial crisis. Moreover, financial contagion may have more or less severe consequences on the real economy, depending on the degree distribution of credit interlinkagess. However, financial instability may be due to real causes. For instance, the deregulation of markets may create the conditions for an increase of inequality. If rich people save a larger part of their income, while the poor are forced to reduce consumption, a lack of aggregate demand may follow, which can eventually lead to a large crisis.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 46578.
Date of creation: Mar 2013
Date of revision:
financial instability; inequality; crisis;
Find related papers by JEL classification:
- C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- P17 - Economic Systems - - Capitalist Systems - - - Performance and Prospects
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