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Social networks and macroeconomic stability

Author

Listed:
  • Chen, Shu-Heng
  • Chang, Chia-Ling
  • Wen, Ming-Chang

Abstract

In this paper, the effect of the social network on macroeconomic stability is examined using an agent-based, network-based DSGE (dynamic stochastic general equilibrium) model. While the authors' primitive (first-stage) examination has the network generation mechanism as its main focus, their more in-depth second-stage analysis is based on a few main characteristics of network topologies, such as the degree, clustering coefficient, length, and centrality. Based on their econometric analysis of the simulation results, the authors find that the betweenness centrality contributes to the GDP instability and average path length contributes to the inflation instability. These results are robust under two augmentations, one taking into account non-linearity and one taking into account the shape of the degree distribution as an additional characteristic. Through these augmentations, the authors find that the effect of network topologies on economic stability can be more intriguing than their baseline model may suggest: in addition to the existence of non-linear or combined effects of network characteristics, the shape of the degree distribution is also found to be significant.

Suggested Citation

  • Chen, Shu-Heng & Chang, Chia-Ling & Wen, Ming-Chang, 2014. "Social networks and macroeconomic stability," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 8, pages 1-40.
  • Handle: RePEc:zbw:ifweej:201416
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    File URL: http://dx.doi.org/10.5018/economics-ejournal.ja.2014-16
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    File URL: https://www.econstor.eu/bitstream/10419/95679/1/781932890.pdf
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    References listed on IDEAS

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    1. K. Vela Velupillai, 2011. "DSGE And Beyond – Computable And Constructive Challenges," ASSRU Discussion Papers 1122, ASSRU - Algorithmic Social Science Research Unit.
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    Cited by:

    1. Rengs, Bernhard & Scholz-Waeckerle, Manuel, 2017. "Consumption & Class in Evolutionary Macroeconomics," MPRA Paper 80021, University Library of Munich, Germany.
    2. Kurt Kratena, 2015. "Thematic report: Macroeconomic models including specifically social and environmental aspects," WWWforEurope Deliverables series 8, WWWforEurope.
    3. repec:wfo:wstudy:57891 is not listed on IDEAS
    4. Ketelaar, Paul E. & Janssen, Loes & Vergeer, Maurice & van Reijmersdal, Eva A. & Crutzen, Rik & van ‘t Riet, Jonathan, 2016. "The success of viral ads: Social and attitudinal predictors of consumer pass-on behavior on social network sites," Journal of Business Research, Elsevier, vol. 69(7), pages 2603-2613.
    5. Hanappi, Hardy & Scholz-Waeckerle, Manuel, 2015. "Evolutionary Political Economy: Content and Methods," MPRA Paper 75447, University Library of Munich, Germany.
    6. Bernhard Rengs & Manuel Scholz-Wäckerle & Ardjan Gazheli & Miklós Antal & Jeroen van den Bergh, 2015. "Testing innovation, employment and distributional impacts of climate policy packages in a macro-evolutionary systems setting," WWWforEurope Working Papers series 83, WWWforEurope.
    7. repec:wfo:wstudy:58411 is not listed on IDEAS

    More about this item

    Keywords

    New Keynesian DSGE models; Agent-based model; macroeconomic stability; social networks; Ising model; betweenness centrality; seemingly unrelated regression estimation;

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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