Real and financial crises in the Keynes-Kalecki structuralist model: An agent-based approach

Authored by Mark Setterfield, Bill Gibson

Date Published: 2018

DOI: 10.1111/meca.12201

Sponsors: No sponsors listed

Platforms: NetLogo

Model Documentation: Other Narrative Pseudocode Mathematical description

Model Code URLs: http://www.uvm.edu/~wgibson/Research/GS.nlogo

Abstract

Agent-based models are inherently microstructureswith their attention to agent behavior in a field contextand only aggregate up to systems with recognizable macroeconomic characteristics. One might ask why the traditional Keynes-Kalecki or structuralist (KKS) model would bear any relationship to the multi-agent modeling approach. This paper shows how KKS models might benefit from agent-based microfoundations, without sacrificing traditional macroeconomic themes, such as aggregate demand, animal spirits and endogenous money. Above all, the integration of the two approaches gives rise to the possibility that a KKS systemstable over many consecutive time periodsmight lurch into an uncontrollable downturn, from which a recovery would require outside intervention. As a by-product of the integration of these two popular approaches, there emerges a cogent analysis of the network structure necessary to bind real and financial agents into an integrated whole. It is seen, contrary to much of the existing literature, that a highly connected financial system does not necessarily lead to more crashes of the integrated system.

Tags

money