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demand) tends to follow the cycle of banks' net worth: when banks are poorly
capitalised this results in credit rationing for firms; in this case, the central bank
intervenes providing credit to banks; on the contrary, when banks are well capi-
talised they are able to fulfil all credit demand. Accordingly, firms' mean leverage
is influenced by credit availability.
Furthermore, we observe that in some cases large crises can appear in the
macroeconomic system. Indeed, the macroeconomic system evolves towards an
“extended crisis” scenario, where the private sector tends to disappear, that is
almost only public workers remain employed. In this case, differently from the
usual business cycle mechanism, the decrease of wages due to growing unem-
ployment does not reverse the cycle, but rather amplifies the recession due to
the lack of aggregate demand. In other words, the self-adjustment mechanism
which spontaneously reverses the business cycle (e.g., the rise of the unemploy-
ment rate reduces the real wage and then the resulting increase of profits makes
room for an expansionary production phase) does not work. Indeed, real wage
lowers excessively boosting a vicious circle for which the fall of purchasing power
prevents firms to sell commodities, then firms reduce production, unemployment
continues to rise, and the system moves towards a large crisis.
In order to assess the role of inequality on financial conditions and macroe-
conomic dynamics, in this paper we consider heterogeneous consumption be-
haviours. As a matter of fact, rich people may accumulate higher wealth while
poor people may suffer from low consumption, so creating negative consequences
at the macroeconomic level, as a lack of aggregate demand, so increasing the like-
lihood of observing a crisis with large unemployment.
The paper is organised as follows. In Section 2 we provide a brief description of
the agent based macroeconomic model. We discuss simulation results in Section
3. Finally, Section 4 concludes.
2 The Model
This paper is based on the model reported in [9]. Here we sketch some of the
modelling properties which characterise our macroeconomic framework.
The system is composed of households (
h
=1
,
2
, ..., H
), firms (
f
=1
,
2
, ..., F
),
banks (
b
=1
,
2
, ..., B
), a central bank, and the government, and it evolves over
a time span
t
=1
,
2
, ..., T
. Agents are heterogeneous, live in an incomplete
and asymmetric information context, follow simple behavioural rules, and use
adaptive expectations. Four markets compose the economy: (i) credit market;
(ii) labour market; (iii) goods market; (iv) deposit market. In what follows we
describe the working of the goods market in more detail. For details about the
working of markets, see [9].
The interaction between the demand (firms in the credit and labor markets,
households in the goods market, and banks in the deposit market) and the
supply (banks in the credit market, households in the labor and deposit markets,
and firms in the goods market) sides of the four markets follows a common
decentralised matching protocol: a random list of agents in the demand side is
