Flexibility of wages and macroeconomic instability in an agent-based computational model with endogenous money
Pascal Seppecher ()
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We present a model of a dynamic and complex economy in which the creation and the destruction of money result from interactions between multiple and heterogeneous agents. In the baseline scenario, we observe the stabilization of the income distribution between wages and profits. We then alter the model by increasing the flexibility of wages. This change leads to the formation of a deflationary spiral. Aggregate activity decreases and the unemployment increases. The macroeconomic stability of the model is affected and eventually a systemic crisis arises. Finally, we show that the introduction of a minimum wage would have allowed the aggregate demand to be boosted and to avoid this crisis.
Keywords: Agent-based modelling; Monetary economics; Endogenous money; Labor market dynamics; Deflation (search for similar items in EconPapers)
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Published in Workshop on Economic Heterogeneous Interacting Agents ESHIA/WEHIA 2010, Jun 2010, Alessandria, Italy
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Journal Article: FLEXIBILITY OF WAGES AND MACROECONOMIC INSTABILITY IN AN AGENT-BASED COMPUTATIONAL MODEL WITH ENDOGENOUS MONEY (2012)
Working Paper: Flexibility of wages and macroeconomic instability in an agent-based computational model with endogenous money (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00661956
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