Weird Ties?: Growth, Cycles and Firms Dynamics in an Agent Based-Model with Financial Market Imperfections

Domenico Delli Gatti and Mauro Gallegati

No 288, Computing in Economics and Finance 2004 from Society for Computational Economics

Abstract: The paper investigates how the interplay between business cycles and long-run growth shapes the dynamics of economies characterized by financial market imperfections. Most of standard economic literature has centered the analysis of decentralized economies on the representative agent hypothesis (REH), often treating short-run and long-run phenomena with distinct sets of models. However models based on the REH have encountered increasing difficulties in accounting for many observed regularities (e.g. the properties of firms and countries growth rates distributions). We propose a simple agent-based model with financial market imperfections and costly-adoption of new technologies which is able to jointly replicate many stylized facts characterizing macroeconomic time-series as well as properties of firms size and firms growth rates distributions. Such regularities emerge from the nested dynamics between short-run demand shocks and long-run productivity shocks. We show that, if unequal access to credit is assumed, productivity shocks have asymmetric effects in the short run. Therefore they can reinforce or weaken the dynamics already induced by demand shocks. Moreover, credit constraints reduce firms" ability to afford better technologies and to smooth the impact of adverse shocks. Thus, even small demand shocks can cause large and persistent fluctuations

Keywords: Financial Market Imperfections; Business Fluctuations; Economic Growth; Firm Size; Firm Growth; Agent-Based Model (search for similar items in EconPapers)
JEL-codes: E32 G30 L11 (search for similar items in EconPapers)
Date: 2004-08-11
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Working Paper: Weird Ties? Growth, Cycles and Firm Dynamics in an Agent-Based Model with Financial-Market Imperfections (2005)
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:sce:scecf4:288

Access Statistics for this paper

More papers in Computing in Economics and Finance 2004 from Society for Computational Economics Contact information at EDIRC.
Bibliographic data for series maintained by Christopher F. Baum ().