Financial Fragility, Industrial Dynamics and Business Fluctuations in an Agent Based Model

22 Pages Posted: 6 Oct 2003

See all articles by Marco Gallegati

Marco Gallegati

Polytechnic University of Marche - Faculty of Economics

Domenico Delli Gatti

Università Cattolica del Sacro Cuore

Corrado Di Guilmi

Universita' Politecnica delle Marche, Ancona - Department of Economics

Gianfranco Giulioni

Universita' Politecnica delle Marche, Ancona - Department of Economics

Date Written: July 23, 2003

Abstract

In this paper, we model an agent-based economy in which heterogeneous agents (firms and a bank) interact in the financial markets. The heterogeneity is due to the balance sheet conditions and to size. In our simulations, at the aggregate level, output displays changes in trend and volatility giving rise to complex dynamics. The average solvency and liquidity ratios peak during recessions as empirical analysis shows. At the firm level the model generates: i) firm sizes left-skewed distributed, ii) growth rates Laplace distributed. Furthermore, small idiosyncratic shocks can generate large aggregate fluctuations.

Keywords: complex macroeconomic dynamics, financial fragility, agent based simulation

JEL Classification: E3

Suggested Citation

Gallegati, Marco and Delli Gatti, Domenico and Di Guilmi, Corrado and Giulioni, Gianfranco, Financial Fragility, Industrial Dynamics and Business Fluctuations in an Agent Based Model (July 23, 2003). Available at SSRN: https://ssrn.com/abstract=429040 or http://dx.doi.org/10.2139/ssrn.429040

Marco Gallegati (Contact Author)

Polytechnic University of Marche - Faculty of Economics ( email )

Piazzale Martelli, 8
60121 Ancona
Italy

Domenico Delli Gatti

Università Cattolica del Sacro Cuore ( email )

LArgo Gemelli 1
Milan, 20123
Italy

Corrado Di Guilmi

Universita' Politecnica delle Marche, Ancona - Department of Economics ( email )

Piazzale Martelli, 8
60121 Ancona
Italy
+39 071 2207110 (Phone)
+39 071 2207102 (Fax)

Gianfranco Giulioni

Universita' Politecnica delle Marche, Ancona - Department of Economics ( email )

Piazzale Martelli 8
Ancona, 18039
Italy
+39 071 2207110 (Phone)
+39 071 2207102 (Fax)

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