TY  - JOUR
AU  - Gatti,Domenico Delli
AU  - Gallegati,Mauro
AU  - Greenwald,Bruce C.
AU  - Russo,Alberto
AU  - Stiglitz,Joseph E.
TI  - Financially Constrained Fluctuations in an Evolving Network Economy 
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 14112
PY  - 2008
Y2  - June 2008
UR  - http://www.nber.org/papers/w14112
L1  - http://www.nber.org/papers/w14112.pdf
N1  - Author contact info:
Domenico Delli Gatti
Istituto di Teoria Economica
Università Cattolica
Largo Gemelli, 1
20123 Milano
E-Mail: domenico.delligatti@unicatt.it

Mauro Gallegati
Dipartimento di Economia
Facolta' di Economia Giorgio Fua'
Universita' Politecnica delle Marche
Piazzale Martelli, 8
60121 Ancona
E-Mail: mauro.gallegati@univpm.it

Bruce C. Greenwald
Columbia University
611 Uris Hall
New York, NY  10027
E-Mail: bg7@columbia.edu

Alberto Russo
Dipartimento di Economia
Facolta' di Economia Giorgio Fua'
Universita' Politecnica delle Marche
Piazzale Martelli, 8
60121 Ancona
E-Mail: albrusso@univpm.it

Joseph E. Stiglitz
Uris Hall, Columbia University
3022 Broadway, Room 212
New York, NY  10027
Tel: 212/854-0671
Fax: 212/662-8474
E-Mail: jes322@columbia.edu
AB  - 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.
ER  -