Multilevel Interactions with a Keynesian Flavour in a Stochastic Macroeconomic Model

Edoardo Gaffeo

No 88, Working Papers from Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali

Abstract: Cycles dragged by switches in preferences are obtained in a stochastic model economy. Both the supply and the demand side, each one of them composed by infinite countable interacting agents, are modelled as dynamic probabilistic processes. Interactions happen at three levels. At a local one, through technological spillovers; at a global one, through preferences spillovers, for the supply and the demand side, respectively; and finally at a mean field level, through rumours producers hear about aggregate demand conditions. Keynesian animal spirits fluctuate as producers perceive that consumers feel more or less confident about their future disposable income. In other words, the way aggregate demand expresses its potentiality drives businessmen's expectations and pushes the economy alternatively towards a 'high-welfare' equilibrium or a 'low-welfare' one.

Keywords: Bounded Rationality; Fluctuations; Local and Global Interactions; Markov Random Fields (search for similar items in EconPapers)
JEL-codes: C4 C61 E32 (search for similar items in EconPapers)
Pages: 37
Date: 1997-05
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Persistent link: https://EconPapers.repec.org/RePEc:anc:wpaper:88

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