2005/03 | LEM Working Paper Series | |
Weird Ties? Growth, Cycles and Firm Dynamics in an Agent-Based Model with Financial-Market Imperfections |
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Mauro Napoletano, Domenico Delli Gatti, Giorgio Fagiolo, Mauro Gallegati |
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Keywords | ||
Financial Market Imperfections, Business Fluctuations, Economic Growth,
Firm Size, Firm Growth, Productivity Growth, Agent-Based Models.
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JEL Classifications | ||
E32, G30, L11, O40.
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Abstract | ||
This paper studies how the interplay between technological shocks and financial variables
shapes the properties of macroeconomic dynamics. Most of the existing literature
has based the analysis of aggregate macroeconomic regularities on the representative
agent hypothesis (RAH). However, recent empirical research on longitudinal
micro data sets has revealed a picture of business cycles and growth dynamics that is
very far from the homogeneous one postulated in models based on the RAH. In this
work, we make a preliminary step in bridging this empirical evidence with theoretical
explanations. We propose an agent-based model with heterogeneous firms, which
interact in an economy characterized by financial-market imperfections and costly
adoption of new technologies. Monte-Carlo simulations show that the model is able
jointly to replicate a wide range of stylised facts characterizing both macroeconomic
time-series (e.g. output and investment) and firms' microeconomic dynamics (e.g.
size, growth, and productivity).
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