The dynamics of leverage in a demand-driven model with heterogeneous firms

Corrado Di Guilmi and Laura Barbosa de Carvalho

Journal of Economic Behavior & Organization, 2017, vol. 140, issue C, 70-90

Abstract: This paper introduces heterogeneous microeconomic behavior into a demand-driven macroeconomic model in order to study the joint dynamics of leverage and capital accumulation. By identifying the links between firm level variables and aggregate quantities, the paper contributes toward a reformulation of the Minskyan formal analysis that explicitly considers the role of microeconomic factors in generating macroeconomic instability. The aggregation of heterogeneous agents is not only performed numerically, as in traditional agent-based models, but also by means of an innovative analytical methodology, originally developed in statistical mechanics and recently imported into macroeconomics. The distinctive feature is in that the joint analysis of the numerical and analytical solutions of the model sheds light on the effects of financial fragility at the firm level on the dynamics of the macroeconomy. In particular, the analysis of steady-state and stability properties of the system provide additional insights on the role of behavioral and size heterogeneity of firms for the stocks of aggregate debt and capital.

Keywords: Financial fragility; Aggregate demand; Agent-based model; Master equation (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0167268117301178
Full text for ScienceDirect subscribers only

Related works:
Working Paper: THE DYNAMICS OF LEVERAGE IN A DEMAND-DRIVEN MODEL WITH HETEROGENEOUS FIRMS (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:140:y:2017:i:c:p:70-90

DOI: 10.1016/j.jebo.2017.04.016

Access Statistics for this article

Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D.

More articles in Journal of Economic Behavior & Organization from Elsevier
Bibliographic data for series maintained by Catherine Liu ().