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Flexibility of wages and macroeconomic instability in an agent-based computational model with endogenous money

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  • Pascal Seppecher

    (CEMAFI - Centre d'Etudes en Macroéconomie et Finance Internationale - UNS - Université Nice Sophia Antipolis (1965 - 2019))

Abstract

We present a model of a dynamic and complex economy in which the creation and the destruction of money result from interactions between multiple and heterogeneous agents. In the baseline scenario, we observe the stabilization 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.

Suggested Citation

  • Pascal Seppecher, 2010. "Flexibility of wages and macroeconomic instability in an agent-based computational model with endogenous money," Post-Print hal-00661956, HAL.
    • Handle: RePEc:hal:journl:hal-00661956
    Note: View the original document on HAL open archive server: https://hal.univ-cotedazur.fr/hal-00661956v2
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    References listed on IDEAS

    as
    1. Pascal Seppecher, 2010. "Dysfonctionnement bancaire, bulle du crédit et instabilité macroéconomique dans une économie monétaire dynamique et complexe," Revue économique, Presses de Sciences-Po, vol. 61(3), pages 441-449.
    2. Roger E.A. Farmer (ed.), 2008. "Macroeconomics in the Small and the Large," Books, Edward Elgar Publishing, number 13236.
    3. Tesfatsion, Leigh & Judd, Kenneth L., 2006. "Handbook of Computational Economics, Vol. 2: Agent-Based Computational Economics," Staff General Research Papers Archive 10368, Iowa State University, Department of Economics.
    4. Tesfatsion, Leigh, 2006. "Agent-Based Computational Economics: A Constructive Approach to Economic Theory," Handbook of Computational Economics, in: Leigh Tesfatsion & Kenneth L. Judd (ed.), Handbook of Computational Economics, edition 1, volume 2, chapter 16, pages 831-880, Elsevier.
    5. Pascal Seppecher, 2009. "Un modèle macroéconomique multi-agents avec monnaie endogène," Working Papers halshs-00370716, HAL.
    6. Leigh Tesfatsion & Kenneth L. Judd (ed.), 2006. "Handbook of Computational Economics," Handbook of Computational Economics, Elsevier, edition 1, volume 2, number 2.
    7. Leijonhufvud, Axel, 2006. "Agent-Based Macro," Handbook of Computational Economics, in: Leigh Tesfatsion & Kenneth L. Judd (ed.), Handbook of Computational Economics, edition 1, volume 2, chapter 36, pages 1625-1637, Elsevier.
    8. Arthur, W. Brian, 2006. "Out-of-Equilibrium Economics and Agent-Based Modeling," Handbook of Computational Economics, in: Leigh Tesfatsion & Kenneth L. Judd (ed.), Handbook of Computational Economics, edition 1, volume 2, chapter 32, pages 1551-1564, Elsevier.
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