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Heterogeneity and Aggregation in a Financial Accelerator Model

By T. Assenza, D. Delli Gatti and M. Gallegati

Abstract

In this paper we present a macroeconomic model in which changes in the variance (and higher moments of the distribution) of firm's financial conditions - i.e. "distributive shocks" - are bound to play a crucial role in the determination of output fluctuations. Firms differ by degree of financial robustness, which affects (optimal) investment in a bankruptcy risk context (à la Greenwald-Stiglitz). As to households, for the sake of simplicity, we assume that they are homogeneous in every respect so that we can adopt the representative agent hypothesis. We can explore the properties of the macro-dynamic model either via the study of the two-dimensional map defining the laws of motion of the average equity ratio and of the variance of the distribution or via simulations in a multiagent framework.

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