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Innovation, Demand, and Finance in an Agent-Based Stock-Flow Consistent Model

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Stock Flow Consistent Modeling session at 12th International Conference

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Innovation, Demand, and Finance in an Agent-Based Stock-Flow Consistent Model

  1. 1. Innovation, Demand, and Finance in an Agent Based-Stock Flow Consistent model" Eugenio Caverzasi e.caverzasi@univpm.it Uiversita Politecnica delle Marche PK Conference, Kansas City E. Caverzasi (Ancona) PK - 2014 Kansas City September the 11th, 2014 1 / 14
  2. 2. Let's give some numbers I Project
  3. 3. nanced by the INET I 3 institutions: (1) Marche Polytechnic University; (2) University of Limerick; (3) Columbia University. I 3 researchers: Alessandro Caiani, Antoine Godin, Eugenio Caverzasi I 2 outcomes: 1 The Model: Innovation, Demand, and Finance in an Agent Based-Stock Flow Consistent model 2 JMAB E. Caverzasi (Ancona) PK - 2014 Kansas City September the 11th, 2014 2 / 14
  4. 4. Outline 1 Methodology 2 the Model E. Caverzasi (Ancona) PK - 2014 Kansas City September the 11th, 2014 3 / 14
  5. 5. AB Macro Models AB Macro Models conceive the economy as a complex system in which market dynamics emerge from the interaction of heterogeneous adaptive agent [see Epstein and Axtell, 1996, Tesfatsion and Judd, 2006, Delli Gatti et al., 2010]. E. Caverzasi (Ancona) PK - 2014 Kansas City September the 11th, 2014 4 / 14
  6. 6. AB Macro Models AB Macro Models conceive the economy as a complex system in which market dynamics emerge from the interaction of heterogeneous adaptive agent [see Epstein and Axtell, 1996, Tesfatsion and Judd, 2006, Delli Gatti et al., 2010]. Some Key Concepts: I Heterogeneity: may be ex ante (endowment, behavioural rules, position) and ex post (stochastic component...). I Interactions: taking place in networks of local interaction. I Adaptivity: agents adapt their decisions in light of its neighbours' and aggregate outcome. E. Caverzasi (Ancona) PK - 2014 Kansas City September the 11th, 2014 4 / 14
  7. 7. AB Macro Models AB Macro Models conceive the economy as a complex system in which market dynamics emerge from the interaction of heterogeneous adaptive agent [see Epstein and Axtell, 1996, Tesfatsion and Judd, 2006, Delli Gatti et al., 2010]. Some Key Concepts: I Heterogeneity: may be ex ante (endowment, behavioural rules, position) and ex post (stochastic component...). I Interactions: taking place in networks of local interaction. I Adaptivity: agents adapt their decisions in light of its neighbours' and aggregate outcome. ) Complexity in economics. I Emergence: arising of orderly aggregate structures from simple adaptive individual rules of conduct. =) Bottom up Macro: continuous interactions between Micro, Meso and Macro levels. E. Caverzasi (Ancona) PK - 2014 Kansas City September the 11th, 2014 4 / 14
  8. 8. Implementing SFC The SFC is ensured the transaction mechanism: I Each agent is endowed with a Balance Sheet matrix with two columns (assets vs liabilities) I The transaction mechanism make sure that all
  9. 9. nancial ows arising out of the transaction respect Copeland's quadruple entry principle. I The transaction mechanisms further ensures total stock- ow consistency by updating reserves of banks when modelling a deposit transfer. What we get: I dynamic network of agents' balance sheets evolving through time ! network and fragility analysis I We obtain a fully scalable view of models dynamics ! the researcher can browse through all the possible levels of aggregation according to his needs. E. Caverzasi (Ancona) PK - 2014 Kansas City September the 11th, 2014 5 / 14
  10. 10. Outline 1 Methodology 2 the Model E. Caverzasi (Ancona) PK - 2014 Kansas City September the 11th, 2014 6 / 14
  11. 11. Objectives I analyze the endogenous emergence of growth, business uctuations, and the possible emergence of
  12. 12. nancial instability. I analyze innovation dynamics and its impact on the structure of production processes, the evolution of industrial market structures, and the employment dynamics. I Schumpeterian Competition I Capital
  13. 13. rms compete by producing equipments entailing dierent levels of productivities I Consumption
  14. 14. rms compete in an homogeneous good market trying to lower production costs through investment in (new) vintages of capital. E. Caverzasi (Ancona) PK - 2014 Kansas City September the 11th, 2014 7 / 14
  15. 15. Flow Diagram E. Caverzasi (Ancona) PK - 2014 Kansas City September the 11th, 2014 8 / 14
  16. 16. Matching mechanisms on markets 5 markets and 1 matching mechanism I Common decentralised matching mechanism: [Riccetti et al., 2014] agents on the demand side of the markets see the price/interest oered by a randomly chosen subset (parameter c which proxies the degree of imperfect information) of agents on the supply side and they choose the best one (market speci
  17. 17. c). I Markets speci
  18. 18. c component: I Cheapest: consumption goods market; Labor market; Credit market. I Higher interest rate: deposit market. I Trade o productivity-price: capital goods market. The probability of switching increases with the dierence between the previous and potential suppliers. E. Caverzasi (Ancona) PK - 2014 Kansas City September the 11th, 2014 9 / 14
  19. 19. Production planning: both kind of
  20. 20. rms set their desired level of production based on individual sales expectations in order to attain a target level of inventories n, yT,t i = se,t i (1 + n)

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