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Centre for Employment Studies
A
new approach to business fluctuations:
heterogeneous interacting agents, scaling laws and financial
fragility (download)
Domenico Delli Gatti *
Corrado Di Guilmi **
Edoardo Gaffeo ***
Gianfranco Giulioni **
Mauro Gallegati **
Antonio Palestrini **
Abstract
In this paper we discuss a scaling approach to business fluctuations.
Our starting point consists in recognizing that concepts and methods
derived from physics have allowed economists to (re)discover a set of
stylized facts which have to be satisfactorily accounted for in their
models. Standard macroeconomics, based on a reductionist approach
centered on the representative agent, is definitely badly equipped for
this task. On the contrary, we show that a simple financial fragility
agent-based model, based on complex interactions of heterogeneous
agents, is able to replicate a large number of scaling type stylized
facts with a remarkable high degree of statistical precision.
Keywords: Business
fluctuations; power law distribution; agent-based model.
JEL classification: E32,
C63, C82.
* Institute
of Quantitative Methods and Economic Theory, Catholic University of
Milan, Italy
** Department of Economics, Università Politecnica delle Marche,
Ancona, Italy
*** Department of Economics and CEEL, University of Trento, Italy
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