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Price dynamics, financial fragility and aggregate volatility

Antoine Mandel, Simone Landini, Mauro Gallegati and Herbert Gintis

Journal of Economic Dynamics and Control, 2015, vol. 51, issue C, 257-277

Abstract: Within a general equilibrium framework à la (Long and Plosser, 1983), we investigate the dynamics emerging from the interactions of households and firms that are adaptive price setters and financially constrained. Adaptive price-setting behavior induces micro-founded out-of-equilibrium dynamics along which agents become heterogeneous in terms of prices and wealth. The stringency of the financial constraints determines the regime into which the model settles: either an equilibrium one or a disequilibrium one conductive to financial fragility and aggregate volatility. In this setting, we 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 et al. (2012).

Keywords: Agent-based modeling; General equilibrium; Financial fragility; Macroeconomic volatility (search for similar items in EconPapers)
JEL-codes: C63 C67 E32 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (17)

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Working Paper: Price dynamics, financial fragility and aggregate volatility (2015) Downloads
Working Paper: Price dynamics, financial fragility and aggregate volatility (2015) Downloads
Working Paper: Price dynamics, financial fragility and aggregate volatility (2015) Downloads
Working Paper: Price Dynamics, financial fragility and aggregate volatility (2013) Downloads
Working Paper: Price Dynamics, financial fragility and aggregate volatility (2013) Downloads
Working Paper: Price dynamics, financial fragility and aggregate volatility (2013) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:51:y:2015:i:c:p:257-277

DOI: 10.1016/j.jedc.2014.11.001

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Journal of Economic Dynamics and Control is currently edited by J. Bullard, C. Chiarella, H. Dawid, C. H. Hommes, P. Klein and C. Otrok

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