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Social networks and macroeconomic stability

Author

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

Abstract

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.

Suggested Citation

  • Chen, Shu-Heng & Chang, Chia-Ling & Wen, Ming-Chang, 2013. "Social networks and macroeconomic stability," Economics Discussion Papers 2013-4, Kiel Institute for the World Economy (IfW).
  • Handle: RePEc:zbw:ifwedp:20134
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    References listed on IDEAS

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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. 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.
    4. Hanappi, Hardy & Scholz-Waeckerle, Manuel, 2015. "Evolutionary Political Economy: Content and Methods," MPRA Paper 75447, University Library of Munich, Germany.
    5. 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.

    More about this item

    Keywords

    New Keynesian DSGE models; macroeconomic stability; social networks; Information dissemination; herding effect; agent-based model;

    JEL classification:

    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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