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Price Dynamics, financial fragility and aggregate volatility

  • Antoine Mandel

    ()

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

  • Simone Landini

    ()

    (Socioeconomic Research Institute of Piedmont - Socioeconomic Research Institute of Piedmont)

  • Mauro Gallegati

    ()

    (Università Politecnica delle Marche - UNIVPM)

  • Herbert Gintis

    (Santa Fe Institute, Central European University - CEU - Central European University)

Within a standard framework à la Arrow-Debreu, we investigate the dynamics emerging from the interactions of heterogeneous households and firms that are adaptive price setters and financially constrained. We show that depending on the stringency of the financial constraints the model can settle in two very different regimes: one characterized by equilibrium, the other by disequilibrium and financial fragility. We then investigate how the structure of the production network affects the emergence of aggregate volatility from micro-level price and financial shocks, hence providing a dynamical counterpart to recent results of Acemoglu and al (2012).

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Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00917892.

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Date of creation: Nov 2013
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Publication status: Published in Documents de Travail du Centre d'Economie de la Sorbonne 2013.76 - ISSN : 1955-611X. 2013
Handle: RePEc:hal:cesptp:halshs-00917892
Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00917892
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  1. Bruce C. Greenwald & Joseph E. Stiglitz, 1993. "Financial Market Imperfections and Business Cycles," The Quarterly Journal of Economics, Oxford University Press, vol. 108(1), pages 77-114.
  2. Giovanni Dosi & Giorgio Fagiolo & Mauro Napoletano & Andrea Roventini, 2012. "Income Distribution, Credit and Fiscal Policies in an Agent-Based Keynesian Model," Documents de Travail de l'OFCE 2012-06, Observatoire Francais des Conjonctures Economiques (OFCE).
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  5. repec:spo:wpecon:info:hdl:2441/f4rshpf3v1umfa09l8sci08kj is not listed on IDEAS
  6. Herbert Gintis & Antoine Mandel, 2012. "The Stability of Walrasian General Equilibrium," Documents de travail du Centre d'Economie de la Sorbonne 12065, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
  7. Sarah Wolf & Steffen Fürst & Antoine Mandel & Wiebke Lass & Daniel Lincke & Federico Pablo-Marti & Carlo Jaeger, 2013. "A multi-agent model of several economic regions," PSE - Labex "OSE-Ouvrir la Science Economique" halshs-00825217, HAL.
  8. Antoine Mandel & Carlo Jaeger & Steffen Fürst & Wiebke Lass & Daniel Lincke & Frank Meissner & Federico Pablo-Marti & Sarah Wolf, 2010. "Agent-based dynamics in disaggregated growth models," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00542442, HAL.
  9. John Geanakoplos & Robert Axtell & Doyne J. Farmer & Peter Howitt & Benjamin Conlee & Jonathan Goldstein & Matthew Hendrey & Nathan M. Palmer & Chun-Yi Yang, 2012. "Getting at Systemic Risk via an Agent-Based Model of the Housing Market," Cowles Foundation Discussion Papers 1852, Cowles Foundation for Research in Economics, Yale University.
  10. Giovanni Dosi & Giorgio Fagiolo & Andrea Roventini, 2008. "Schumpeter Meeting Keynes: A Policy-Friendly Model of Endogenous Growth and Business Cycles," Working Papers 50/2008, University of Verona, Department of Economics.
  11. Xavier Gabaix, 2009. "The Granular Origins of Aggregate Fluctuations," NBER Working Papers 15286, National Bureau of Economic Research, Inc.
  12. Daron Acemoglu & Vasco Carvalho & Asuman Ozdaglar & Alireza Tahbaz-Salehi, 2011. "The network origins of aggregate fluctuations," Economics Working Papers 1291, Department of Economics and Business, Universitat Pompeu Fabra.
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  15. Blake LeBaron & Leigh Tesfatsion, 2008. "Modeling Macroeconomies as Open-Ended Dynamic Systems of Interacting Agents," American Economic Review, American Economic Association, vol. 98(2), pages 246-50, May.
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  18. Stefano Battiston & Domenico Delli Gatti & Mauro Gallegati & Bruce C. Greenwald & Joseph E. Stiglitz, 2009. "Liaisons Dangereuses: Increasing Connectivity, Risk Sharing, and Systemic Risk," NBER Working Papers 15611, National Bureau of Economic Research, Inc.
  19. Antoine Mandel, 2012. "Agent-based dynamics in the general equilibrium model," PSE - Labex "OSE-Ouvrir la Science Economique" halshs-00732823, HAL.
  20. Delli Gatti, Domenico & Gallegati, Mauro & Greenwald, Bruce & Russo, Alberto & Stiglitz, Joseph E., 2010. "The financial accelerator in an evolving credit network," Journal of Economic Dynamics and Control, Elsevier, vol. 34(9), pages 1627-1650, September.
  21. Battiston, Stefano & Delli Gatti, Domenico & Gallegati, Mauro & Greenwald, Bruce & Stiglitz, Joseph E., 2007. "Credit chains and bankruptcy propagation in production networks," Journal of Economic Dynamics and Control, Elsevier, vol. 31(6), pages 2061-2084, June.
  22. Dupor, Bill, 1999. "Aggregation and irrelevance in multi-sector models," Journal of Monetary Economics, Elsevier, vol. 43(2), pages 391-409, April.
  23. Fisher,Franklin M., 1989. "Disequilibrium Foundations of Equilibrium Economics," Cambridge Books, Cambridge University Press, number 9780521378567, June.
  24. 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.
  25. Herbert Gintis, 2007. "The Dynamics of General Equilibrium," Economic Journal, Royal Economic Society, vol. 117(523), pages 1280-1309, October.
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