Abstract
The paper investigates the relationship between the amount of credit money in the economy and the variability of output and prices in the EURACE model. First we examine if the decision about dividends payment by the firms can affect this variability, then we adopt the policy measure of quantitative easing, that has been largely used by the Fed and the Bank of England during the recent crisis, in order to understand its effect on economic instability. Results show the emergence of endogenous business cycles which are mainly due to the interplay between the real economic activity and its financing through the credit market. In particular, the amplitude of the business cycles strongly raises when the fraction of earnings paid out by firms as dividends is higher, that is when firms are more constrained to borrow credit money to fund their activity.
Keywords
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
References
Sallans, B., Pfister, A., Karatzoglou, A., Dorffner, G. (2003) Simulations and validation of an integrated markets model. Journal of Artificial Societies and Social Simulation 6 (4).
Benartzi, S., Thaler, R. H. (1995) Myopic loss aversion and the equity premium puzzle. The Quarterly Journal of Economics 110 (1): 73–92.
Bruun, C. (1999) Agent-based Keynesian economics: simulating a monetary production system bottom-up. University of Aaborg.
Carroll, C. D., 2001. A theory of the consumption function, with and without liquidity constraints. Journal of Economic Perspectives 15 (3): 23–45.
Dawid, H., Gemkow, S., Harting, P., Kabus, K., Neugart, M., Wersching, K. (2008) Skills, innovation, and growth: An agent-based policy analysis. Journal of Economics and Statistics 228 (2+3): 251–275.
Dawid, H., Gemkow, S., Harting, P., Neugart, M. (2009) On the effects of skill upgrading in the presence of spatial labor market frictions: an agent-based analysis of spatial policy design. Journal of Artificial Societies and Social Simulation 12 (4).
Deaton, A. (1992) Household saving in ldcs: credit markets, insurance and welfare. The Scandinavian Journal of Economics 94 (2): 253–273.
Deissenberg, C., van der Hoog, S., H., Dawid (2008) Eurace: A massively parallel agent-based model of the european economy. Applied Mathematics and Computation 204: 541–552.
E. Kutschinski, T. U., Polani, D., September (2003) Learning competitive pricing strategies by multi-agent reinforcement learning. J Econometrics 27 (11-12): 2207–2218
Eurace (2009) Final activity report. http://www.eurace.org/
Eurace Project D5.1 (2007) Agent based models of goods, labour and credit markets. http://www.eurace.org
Eurace Project D5.2 (2008) Computational experiments of policy design on goods, labour and credit markets. http://www.eurace.org
Eurace Project D6.1 (2007) Agent based models of financial markets. http://www.eurace.org
Eurace Project D6.2 (2008) Computational experiments of policy design on financial markets. http://www.eurace.org
Eurace Project D7.1 (2007) Agent based models for skill dynamics and innovation. http://www.eurace.org
Eurace Project D7.2 (2008) Computational experiments of policy design on skill dynamics and innovation. http://www.eurace.org
LeBaron, B. D. (2006) Agent-based computational finance. Vol. 2 of Handbook of Computational Economics. North Holland
Tassier, T. (2001) Emerging small-world referral networks in evolutionary labor markets. IEEE Transaction of Evolutionary Computation 5 (5), 482–492
Teglio, A., Raberto, M., Cincotti, S. (2009) Explaining equity excess return by means of an agent-based financial market. Lecture Notes in Economics and Mathematical Systems. Springer Verlag, Ch. 12, pp. 145–156
Tesfatsion, L. (2001) Structure, behaviour, and market power in an evolutionary labour market with adaptive search. Journal of Economics Dynamics and Control 25: 419–457
Tesfatsion, L., Judd, K. (2006) Agent-Based Computational Economics. Vol. 2 of Handbook of Computational Economics. North Holland
Tversky, A., Kahneman, D., October (1992) Advances in prospect theory: cumulative representation of uncertainty. Journal of Risk and Uncertainty 5 (4), 297–323
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2010 Springer Berlin Heidelberg
About this paper
Cite this paper
Teglio, A., Raberto, M., Cincotti, S. (2010). Endogenous Credit Dynamics as Source of Business Cycles in the EURACE Model. In: Li Calzi, M., Milone, L., Pellizzari, P. (eds) Progress in Artificial Economics. Lecture Notes in Economics and Mathematical Systems, vol 645. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-13947-5_17
Download citation
DOI: https://doi.org/10.1007/978-3-642-13947-5_17
Published:
Publisher Name: Springer, Berlin, Heidelberg
Print ISBN: 978-3-642-13946-8
Online ISBN: 978-3-642-13947-5
eBook Packages: Business and EconomicsEconomics and Finance (R0)