LUMPY INVESTMENT AND ENDOGENOUS BUSINESS CYCLES IN AN EVOLUTIONARY MULTI-AGENT MODEL
This article presents an evolutionary model of output and investment dynamics yielding endogenous business cycles. The model describes an economy composed of firms and consumers/workers. Firms belong to two industries. The first one performs R&D and produces heterogenous machine tools. Firms in the second industry invest in new machines and produce a homogenous consumption. Consumers sell their labor and fully consume their income. In line with the empirical literature on investment patterns, we assume that firms' investment decisions are lumpy and constrained by their financial structure. Simulation results show that the model is able to deliver self-sustaining patterns of growth characterized by the presence of endogenous business cycles. The model can also replicate the most important stylized facts concerning micro- and macro-economic dynamics.
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Document Type: Research Article
Affiliations: 1: Sant'Anna School of Advanced Studies, Pisa, Italy 2: University of Modena and Reggio Emilia, Italy
Publication date: September 1, 2007