Firm performance, macroeconomic conditions, and “animal spirits” in a Post Keynesian model of aggregate fluctuations

Shyam Gouri Suresh and Mark Setterfield

No 14-03, Working Papers from Davidson College, Department of Economics

Abstract: We construct a multi-agent system (MAS) model of cyclical growth in which aggregate fluctuations result from variations in activity at firm level. The latter, in turn, result from changes in “animal spirits” or the state of long run expectations (SOLE) and their effect on firms’ investment behavior. We focus on the impact of publicly-available information about macroeconomic conditions – analogous to the press releases of national statistical agencies – on changes in the SOLE and hence the amplitude of aggregate fluctuations. Our results suggest that the amplitude of fluctuations is reduced by extremes of attention or inattention to aggregate economic performance, but that this relationship is subject to complicated (and possibly complex) phase transitions exhibiting extreme sensitivity to initial conditions.

Keywords: Aggregate fluctuations; cyclical growth; animal spirits; state of long run expectations; sentiment; multi-agent systems (search for similar items in EconPapers)
JEL-codes: C63 E12 E32 E37 O41 (search for similar items in EconPapers)
Date: 2014-02
New Economics Papers: this item is included in nep-env, nep-mac and nep-pke
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Citations: View citations in EconPapers (2)

Published in Journal of Post Keynesian Economics, 2015, Volume 38, Issue 1, pages 38-63

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Journal Article: Firm performance, macroeconomic conditions, and “animal spirits” in a Post Keynesian model of aggregate fluctuations (2015)
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