|
Domenico Delli Gatti, Mauro Gallegati, Bruce C. Greenwald, Alberto Russo, Joseph E. Stiglitz
NBER Working Paper No. 14112
Issued in June 2008
NBER Program(s): EFG
---- Abstract -----
We explore the properties of a credit network characterized by inside credit - i.e. credit relationships connecting downstream (D) and upstream (U) firms - and outside credit - i.e. credit relationships connecting firms and banks. The structure of the network changes over time due to the preferred-partner choice rule: each agent chooses the partner who charges the lowest price. The net worth of D firms turns out to be the driver of fluctuations. U production, in fact, is determined by demand of intermediate inputs on the part of D firms and production of the latter is financially constrained, i.e. determined by the availability of internal finance proxied by net worth. The output of simulations shows that at the macroeconomic level a business cycle can develop as a consequence of the complex interaction of the agents' financial conditions. We can also reproduce the main stylized facts of firms' demography, i.e. the power law distribution of firms' size and the Laplace distribution of firms' growth rates.
Would you like an annual subscription to NBER Working Papers? Click
here for more information.
You may purchase this paper on-line in .pdf format
from SSRN.com ($5) for electronic delivery.
Information for subscribers and others expecting no-cost downloads
Machine-readable bibliographic record -
MARC,
RIS,
BibTeX
| 
