Demand, credit and macroeconomic dynamics: A microsimulation model

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Abstract

We develop a microsimulation model for the macroeconomic business cycle.
Our model is based on three main ideas: (i) we want to specify how
macroeconomic coordination is achieved without a dominating influence of
price mechanisms, (ii) we want to incorporate the stock-flow-consistent
approach that has become popular in post-Keynesian macroeconomics, and
(iii) we want to allow for bankruptcies as a major mechanism in the
business cycle. Compared to existing stock-flow-consistent models, our
model has relatively few equations. It is operationalized using micro,
agent-based simulation. The results show a clear business cycle that is
driven by accumulation of financial assets and the effects this has on
the real economy. By changing some of the key parameters, we show how
the nature of the business cycle changes as a result of changes in the
assumed behaviour of agents.
Original languageEnglish
Place of PublicationMaastricht
PublisherUNU-MERIT
Number of pages29
Publication statusPublished - 1 Jan 2014

Publication series

SeriesUNU-MERIT Working Papers
Number2014-047

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