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Cornelia Metzig (Imperial College)

14 March 2016 @ 12:45

 

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Date:
14 March 2016
Time:
12:45
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“Scaling and Evolutionary Growth in a Macroeconomic Agent-Based Model”

abstract

I present a simple stock-flow consistent macroeconomic agent-based model for the production cycle, composed of firms, households and a financial sector. Competition of firms in the markets generates a stochastic process for firm evolution, which can be described theoretically. Results are several interrelated distributions for quantities like firm size, firm growth rate and temporal fluctuations. Only for a certain range parameter range, firm size distribution follows a scaling law.

A more realistic scenario of this model describes firms with heterogeneous profitability, such that profitable firms slowly outperform less profitable firms. These dynamics follow replicator equations. The whole system can still be in a stationary state: firms can lose profitability through debt accumulation and go bankrupt, and new firms start at each timestep. These features make the model assumptions and results more plausible. The obtained distributions and scaling exponents are closer to those of empirical data. This analysis shows that distribution parameters tell something about the state of the system, since they vary during the business cycle.

The model combines an argument from evolutionary economics (profit drives growth) with markets that are in statistical equilibrium. Since the model is stock-flow consistent, it also produces debt-driven endogeneous cycles in economic activity, debt and other aggregate quantities. This phenomenon and its governing parameters are analyzed. In addition to stock-flow consistency, the existence of cycles requires random market allocations and market clearing.