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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)

  • Simone Landini


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

  • Mauro Gallegati


    (Università Politecnica delle Marche - UNIVPM)

  • Herbert Gintis

    (Santa Fe Institute - 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
Date of revision:
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
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