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Pascal Seppecher (2010) Flexibility of wages and macroeconomic instability in an agent-based computational model with endogenous money, , Unpublished

Url: Not available

assets={deposits, loans, money},
characteristics={Heterogenous agent based, mainly real side},
date-added={2012-08-20 16:38:27 +0200},
date-modified={2012-08-24 10:37:39 +0200},
methodology={Theoretical/Simulation},
sectors={Households, banks, firms},

Abstract: We present a model of a dynamic and complex economy in which the cre- ation and the destruction of money result from interactions between multiple and heterogeneous agents. In the baseline scenario, we observe the stabiliza- tion of the income distribution between wages and profits. We then alter the model by increasing the flexibility of wages. This change leads to the formation of a deflationary spiral. Aggregate activity decreases and the unemployment increases. The macroeconomic stability of the model is affected and eventually a systemic crisis arises. Finally, we show that the introduction of a minimum wage would have allowed the aggregate demand to be boosted and to avoid this crisis.

Keywords: employment, heterogenous agents, income distribution

November 13, 2010 | Comments Closed