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Weird Ties? Growth, Cycles and Firm Dynamics in an Agent-Based Model with Financial-Market Imperfections

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Author Info
Mauro Napoletano
Domenico Delli Gatti
Giorgio Fagiolo
Mauro Gallegati

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Abstract

This paper studies how the interplay between technological shocks and financial variables shapes the properties of macroeconomic dynamics. Most of the existing literature has based the analysis of aggregate macroeconomic regularities on the representative agent hypothesis (RAH). However, recent empirical research on longitudinal micro data sets has revealed a picture of business cycles and growth dynamics that is very far from the homogeneous one postulated in models based on the RAH. In this work, we make a preliminary step in bridging this empirical evidence with theoretical explanations. We propose an agent-based model with heterogeneous firms, which interact in an economy characterized by financial-market imperfections and costly adoption of new technologies. Monte-Carlo simulations show that the model is able jointly to replicate a wide range of stylised facts characterizing both macroeconomic time-series (e.g. output and investment) and firms' microeconomic dynamics (e.g. size, growth, and productivity).

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Paper provided by Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy in its series LEM Papers Series with number 2005/03.

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Date of creation: 10 Mar 2005
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Handle: RePEc:ssa:lemwps:2005/03

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Related research
Keywords: Financial Market Imperfections; Business Fluctuations; Economic Growth; Firm Size; Firm Growth; Productivity Growth; Agent-Based Models.;

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