Mauro Gallegati

Dipartimento di Economia
Facolta' di Economia Giorgio Fua'
Universita' Politecnica delle Marche
Piazzale Martelli, 8
60121 Ancona

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NBER Working Papers and Publications

January 2009Liaisons Dangereuses: Increasing Connectivity, Risk Sharing, and Systemic Risk
with Stefano Battiston, Domenico Delli Gatti, Bruce C. Greenwald, Joseph E. Stiglitz: w15611
We characterize the evolution over time of a network of credit relations among financial agents as a system of coupled stochastic processes. Each process describes the dynamics of individual financial robustness, while the coupling results from a network of liabilities among agents. The average level of risk diversification of the agents coincides with the density of links in the network. In addition to a process of diffusion of financial distress, we also consider a discrete process of default cascade, due to the re-evaluation of agents' assets. In this framework we investigate the probability of individual defaults as well as the probability of systemic default as a function of the network density. While it is usually thought that diversification of risk always leads to a more stable fin...

Published: Battiston, Stefano & Delli Gatti, Domenico & Gallegati, Mauro & Greenwald, Bruce & Stiglitz, Joseph E., 2012. "Liaisons dangereuses: Increasing connectivity, risk sharing, and systemic risk," Journal of Economic Dynamics and Control, Elsevier, vol. 36(8), pages 1121-1141. citation courtesy of

June 2008Financially Constrained Fluctuations in an Evolving Network Economy
with Domenico Delli Gatti, Bruce C. Greenwald, Alberto Russo, Joseph E. Stiglitz: w14112
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 compl...
July 2007Net Worth, Exchange Rates, and Monetary Policy: The Effects of a Devaluation in a Financially Fragile Environment
with Domenico Delli Gatti, Bruce C. Greenwald, Joseph E. Stiglitz: w13244
In this paper we propose an Open Economy Financial Accelerator model along the lines of Greenwald-Stiglitz (1993) close in spirit but different in many respects from the one proposed by Greenwald (1998.) The first goal of the paper is to provide a taxonomy of the effects of a devaluation in this context. The direct (first round) effect on output, taking as given net worth and interest rate, is negative for domestic firms (due to the input cost effect) and positive for exporting firms (due to a positive foreign debt effect). The indirect (second round) wealth effect (on output through net worth, taking as given the interest rate) is uncertain, depending on the relative size of the domestic and exporting firms. There is also an indirect effect on output through the response of the domestic i...
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