Increasing inequality, consumer credit and financial fragility in an agent based macroeconomic model

Alberto Russo, Luca Riccetti and Mauro Gallegati

Journal of Evolutionary Economics, 2016, vol. 26, issue 1, 25-47

Abstract: We investigate the interplay between increasing inequality and consumer credit in a complex macroeconomic system with financially fragile heterogeneous households, firms and banks. Simulation results show that there are pros and cons of introducing consumer credit: on the one hand, for a certain time, it leads to lower unemployment through boosting aggregate demand; on the other hand, it accelerates the system tendency to the crisis. Since the increase of financial profits goes with a decline of households’ real wealth, a policy trade-off emerges. Copyright Springer-Verlag Berlin Heidelberg 2016

Keywords: Consumer credit; Inequality; Agent-based macroeconomics; Business cycle; Profit rate; Crisis; Unemployment; C63; D31; E21; E32 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (113)

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DOI: 10.1007/s00191-015-0410-z

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