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Debt Deleveraging and Business Cycles: An Agent-Based Perspective

37 Pages Posted: 17 Dec 2011  

Marco Raberto

affiliation not provided to SSRN

Andrea Teglio

affiliation not provided to SSRN

Silvano Cincotti

University of Genoa

Date Written: 2011

Abstract

The recent financial crises pointed out the central role of public and private debt in modern economies. However, even if debt is a recurring topic in discussions about the current economic situation, economic modelling does not take into account debt as one of the crucial determinants of economic dynamics. Our contribution, in this paper, is to investigate the issues of borrowing and debt load by means of computational experiments, performed in the environment of the agent-based Eurace simulator. We aim to shed some light on the relation between debt and the main economic indicators. Our results clearly confirm that the amount of credit money in the economy is a very important variable, that can affect economic performance in a twofold way: fostering growth or pushing the economy into recession or crisis. The outcomes of our experiments show a rich scenario of interactions between real and financial variables in the economy, and therefore represents a truly innovative tool for the study of economics.

Keywords: Agent-based computational economics, debt, leverage, credit money, economic crisis

JEL Classification: E2, E3, E44, E51

Suggested Citation

Raberto, Marco and Teglio, Andrea and Cincotti, Silvano, Debt Deleveraging and Business Cycles: An Agent-Based Perspective (2011). Economics Discussion Paper No. 2011-31. Available at SSRN: https://ssrn.com/abstract=1973855 or http://dx.doi.org/10.2139/ssrn.1973855

Marco Raberto (Contact Author)

affiliation not provided to SSRN

Andrea Teglio

affiliation not provided to SSRN

No Address Available

Silvano Cincotti

University of Genoa ( email )

DIME-DOGE.I
via Opera Pia, 15
Genova, 16145
Italy

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