Bankruptcy as an exit mechanism for systems with a variable number of components

Gatti, Domenico Delli; Guilmi, Corrado Di; Gaffeo, Edoardo; Gallegati, Mauro

doi:10.1016/j.physa.2004.06.079

Cited by 11 publications

(7 citation statements)

References 15 publications

(17 reference statements)

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“…Lighter gray lines correspond to higher values of the parameter. (footnote continued) that the simulated distribution is better approximated by a log-normal, diverging in this respect from the evidence provided by Di Delli Gatti et al (2004). 44 Admittedly, several other parameters are likely to exert an impact, such as the rate of taxation, the threshold employed in workers reservation wage function, or households' propensities to consume.…”

Section: Robustness Checksmentioning

confidence: 93%

“…41 We obtain p-value ¼0, χ 2 ¼ 26.074 for credit degree distribution, and p-value ¼0, χ 2 ¼ 77.912 for banks' credit distribution. 42 In particular, Di Delli Gatti et al (2004) suggest that both distributions have right tails scaling down to a Pareto. 43 The skewness is equal to 2.16 for firms' bad debt and 1.97 for firms' bankruptcies, whereas the former has an excess kurtosis equal to 2.16 and the latter 1.32.…”

Section: Micro-stylized Factsmentioning

confidence: 99%

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Agent based-stock flow consistent macroeconomics: Towards a benchmark model

Caiani

Godin

Caverzasi

et al. 2016

Journal of Economic Dynamics and Control

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a b s t r a c tThe paper moves from a discussion of the challenges posed by the crisis to standard macroeconomics and the solutions adopted within the DSGE community. Although several recent improvements have enhanced the realism of standard models, we argue that major drawbacks still undermine their reliability. In particular, DSGE models still fail to recognize the complex adaptive nature of economic systems, and the implications of money endogeneity. The paper argues that a coherent and exhaustive representation of the inter-linkages between the real and financial sides of the economy should be a pivotal feature of every macroeconomic model and proposes a macroeconomic framework based on the combination of the Agent Based and Stock Flow Consistent approaches. The papers aims at contributing to the nascent AB-SFC literature under two fundamental respects: first, we develop a fully decentralized AB-SFC model with several innovative features, and we thoroughly validate it in order to check whether the model is a good candidate for policy analysis applications. Results suggest that the properties of the model match many empirical regularities, ranking among the best performers in the related literature, and that these properties are robust across different parameterizations. Second, the paper has also a methodological purpose in that we try to provide a set or rules and tools to build, calibrate, validate, and display AB-SFC models.& 2016 Elsevier B.V. All rights reserved. Is the economic crisis a crisis for macroeconomics?More than eight years since the onset of the global financial crisis we are still assessing how the crisis should change our view about macroeconomics. The crisis cast serious doubts on the plausibility of standard macroeconomic models -in particular of dynamic stochastic general equilibrium (DSGE) models -and their ability to provide effective policy advices to prevent the occurrence of large-scale economic turmoils, and to tackle their consequences.In a nutshell, the anatomy of the standard DSGE model presents an economy composed of different types of representative agents, such as households and firms, maximizing in a infinite lifetime horizon an objective function subject to an inter-temporal budget constraint. The first order conditions yield a fully state-contingent plan for the representative agents

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Section: Robustness Checksmentioning

confidence: 93%

Section: Micro-stylized Factsmentioning

confidence: 99%

Agent based-stock flow consistent macroeconomics: Towards a benchmark model

Caiani

Godin

Caverzasi

et al. 2016

Journal of Economic Dynamics and Control

Self Cite

258

167

View full text Add to dashboard Cite

show abstract

“…We choose a power law distribution for the firm's fragility indices p i because most of the measures of company performance, both positive (Axtell 2001) and negative (Fujiwara 2004, Delli Gatti et al 2004, have been found to display such power law distributions.…”

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confidence: 99%

When the collective acts on its components: economic crisis autocatalytic percolation

Cantono

Solomon

2010

New J. Phys.

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Agent-based models have improved the standards for empirical support and validation criteria in social, biological, cognitive and human sciences. Yet, the inclusion, in these models, of vertical interactions between various aggregation levels remains a challenge. We study analytically, numerically and by simulation the generic consequences of interactions between the collective and its individual components: the appearance of an autocatalytic loop between the dynamics of the collective and its components; the system, which is dominated by a limited number of factors amplified by this collective↔individuals autocatalytic loop; the microscopic features, which are not involved in the autocatalytic loop and are irrelevant at the systemic level; and how the above clarify the interplay between macroscopic predictable features and the ones dependent on random unpredictable individual events. Using the social and market percolation framework, we study the dramatic effects of the collective↔individuals autocatalytic loop on economic crisis propagation: the percolation transition becomes discontinuous; there are a few relevant regions and regimes corresponding to a quite diverse range of response policy options; there are stability ranges where appropriate policies can help to avoid macroscopic crisis percolation; and beyond those regions the systemic crisis might become unstoppable.

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“…if the individual price falls below a critical threshold. The probability of bankruptcy turns out to be an increasing function of the interest rate and the capital stock, and a decreasing function of the equity base inherited from the past [8,12].…”

mentioning

confidence: 99%

Scaling Laws in the Macroeconomy

Gatti

Guilmi

Gallegati

et al. 2008

Advs. Complex Syst.

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The practice of detecting power laws and scaling behaviors in economics and finance has gained momentum in the last few years, due to the increased use of concepts and methods first developed in statistical physics. Some disappointment has emerged in the economic profession, however, as regards the models proposed so far to theoretically explain these phenomena. In this paper we aim to address this criticism, showing that scaling behaviors can naturally emerge in a multiagent system with optimizing interacting units characterized by financial fragility.

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Bankruptcy as an exit mechanism for systems with a variable number of components

Cited by 11 publications

References 15 publications

Agent based-stock flow consistent macroeconomics: Towards a benchmark model

Agent based-stock flow consistent macroeconomics: Towards a benchmark model

When the collective acts on its components: economic crisis autocatalytic percolation

Scaling Laws in the Macroeconomy

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