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Social networks and macroeconomic stability

Listed author(s):
  • Chen, Shu-Heng
  • Chang, Chia-Ling
  • Wen, Ming-Chang

We construct an agent-based New Keynesian DSGE model with different social network structures to investigate the significance of network topologies to macroeconomic stability. According to our simulation results, we find that the more liquid the information flow, the higher the stability of the economy. Furthermore, the speed of information dissemination and the degree of clustering among agents may give rise to an adverse effect on economic stability. Finally, we find that the scale-free network will lead to the most dramatic economic fluctuations. The result is ascribed to the scale-free network's high centrality. It indicates that the opinion leaders may bring about a conglomerate effect that will cause fluctuations in the economy.

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Paper provided by Kiel Institute for the World Economy (IfW) in its series Economics Discussion Papers with number 2013-4.

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Date of creation: 2013
Handle: RePEc:zbw:ifwedp:20134
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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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  4. Chang, Chia-ling & Chen, Shu-heng, 2011. "Interactions in DSGE models: The Boltzmann-Gibbs machine and social networks approach," Economics Discussion Papers 2011-25, Kiel Institute for the World Economy (IfW).
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