Debt Deleveraging and Business Cycles: An Agent-Based Perspective
37 Pages Posted: 17 Dec 2011
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: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Credit Money and Macroeconomic Instability in the Agent-Based Model and Simulator Eurace
By Silvano Cincotti, Marco Raberto, ...
-
Credit Money and Macroeconomic Instability in the Agent-Based Model and Simulator Eurace
By Silvano Cincotti, Marco Raberto, ...
-
Income Distribution, Credit and Fiscal Policies in an Agent-Based Keynesian Model
By Giovanni Dosi, Giorgio Fagiolo, ...
-
Banks, Market Organization, and Macroeconomic Performance: An Agent-Based Computational Analysis
By Quamrul H. Ashraf, Boris Gershman, ...
-
Banks, Market Organization, and Macroeconomic Performance: An Agent-Based Computational Analysis
By Quamrul H. Ashraf, Boris Gershman, ...
-
The Eurace@Unibi Model: An Agent-Based Macroeconomic Model for Economic Policy Analysis
By Herbert Dawid, Simon Gemkow, ...
-
Innovation, Price Dispersion, and Emergent Increasing Returns to Scale
By David M. Levy and Michael D. Makowsky
-
How Inflation Affects Macroeconomic Performance: An Agent-Based Computational Investigation
By Quamrul H. Ashraf, Boris Gershman, ...
-
How Inflation Affects Macroeconomic Performance: An Agent-Based Computational Investigation
By Quamrul H. Ashraf, Boris Gershman, ...
-
An Agent-Based Decentralized Matching Macroeconomic Model
By Luca Riccetti, Alberto Russo, ...