We complement the theory of tick-by-tick dynamics of financial markets based on a continuous-time random walk (CTRW) model recently proposed by Scalas ct al. (Physica A 284 (2000) 376), and we point out its consistency with the behaviour observed in the waiting-time distribution for BUND future prices traded at LIFFE, London

In financial markets, not only prices and returns can be considered as random variables, but also the waiting time between two transactions varies randomly. In the following, we analyse the statistical properties of General Electric stock prices, traded at NYSE, in October 1999: These properties are critically revised in the framework of theoretical predictions based on a continuous-time random walk model

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This paper introduces an agent-based artificial financial market in which heterogeneous agents trade one single asset through a realistic trading mechanism for price formation. Agents are initially endowed with a finite amount of cash and a given finite portfolio of assets. There is no money-creation process; the total available cash is conserved in time. In each period, agents make random buy and sell decisions that are constrained by available resources, subject to clustering, and dependent on the volatility of previous periods. The model herein proposed is able to reproduce the leptokurtic shape of the probability density of log price returns and the clustering of volatility. Implemented using extreme programming and object-oriented technology, the simulator is a flexible computational experimental facility that can find applications in both academic and industrial research projects.

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This paper investigates the interplay between monetary aggregates and the dynamics and variability of output and prices by considering both the money supplied by commercial banks as credit to firms and the fiat money created by the central bank through the quantitative easing monetary policy. The authors address this problem by means of an agentbased model and simulator, called Eurace, which is characterized by a complete set of interrelated markets and different types of interacting agents, modeled according to a rigorous balance-sheet approach. The dynamics of credit money is endogenous and depends on the supply of credit from the banking system, which is constrained by its equity base, and the demand of credit from firms in order to finance their production activity. Alternative dynamic paths for credit money have been produced by setting different firms' dividend policies. Results point out the strict dependence of output and prices dynamics on monetary aggregates, and 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 rises 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. This interesting evidence can be explained by the fact that the level of firms leverage, defined as the debt-equity ratio, can be considered ad a proxy of the likelihood of bankruptcy, an event which causes mass layoffs and supply decrease. Special Issue Managing Financial Instability in Capitalist Economies JEL E42, E2, E32 Keywords Macroconomic policy design; agent-based computational economics credit money; economic instability, quantitative easing Correspondence Silvano Cincotti,

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 modeling does not take into account debt as one of the crucial determinants of economic dynamics. The authors’ contribution, in this paper, is to investigate the issues of borrowing and debt load by means of computational experiments, performed in\ud the environment of the agent-based Eurace simulator. The authors aim to shed some light on the relation between debt and main economic indicators. Their results clearly confirm that the amount of credit in the economy is a very important variable, which can affect economic performance in a twofold way: fostering growth or pushing the economy into recession or crisis. The outcomes of their computational experiments show a rich scenario of interactions between real and financial variables in the economy, and therefore represent a truly innovative\ud tool for the study of economics

Major structural changes to the current fossil-fuel based economic system are needed in order to address the climate change challenge. To this purpose, effective Renewable Energy Sources (RES) support policies, along with concrete efforts towards the improvement of energy efficiency, have been adopted in many countries.One of these policies is the feed-in-tariff (FiT) mechanism, according to which electricity produced by RES is sold at guaranteed prices (feed-in tariffs), which are higher than market ones, for fixed periods of time.In this paper, we investigate how to foster a sustainability transition of the energy system towards an economically and ecologically sustainable growth path by using an enriched version of the Eurace model. Eurace has been enriched by including an energy sector where electricity is demanded by domestic producers and is supplied by a fossil-fuel based power producer as well as a renewable-energy based one. Both power producers undertake pricing and capacity investment decisions based on the price of imported fossil fuel and feed-in tariff government policy. In particular, we investigate how the economy is affected by the fiscal costs of financing the feed-in tariff mechanism and by the benefits of lower fossil fuels imports, in order to devise the policy with the best cost-benefit trade-off for the macroeconomy as a whole.Results show that the feed-in-tariff policy is effective in fostering the sustainability transition of the energy sector and that it increases the level of investments in the economy with a slightly positive impact on the unemployment rates. Moreover, we observe that its financing costs do not impact government finances in a relevant way. On the other hand, the higher level of investments occurs at the expense of the production of consumption goods, therefore with a negative impact for the living standards, at least according to the perspective of a consumerist society. However, if factors like better employment rates and the reduced GHG emissions are also taken into account, along with consumption, by an appropriate preference function, the final outcome on well-being should be probably deemed as favourable.