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set, then the first agent in the list observes a random subset of potential partners
and chooses the cheapest one. After that, the second agent on the list performs
the same activity on a new random subset of the updated potential partner
list. The process iterates till the end of the demand side list. Subsequently, a
new random list of agents in the demand side is set and the whole matching
mechanism goes on until either one side of the market (demand or supply) is
empty or no further matchings are feasible.
2.1 Credit Market
Firms and banks interact in the credit market. Firms' credit demand depends on
their net worth and the leverage target. The leverage target varies according to
expected profits and inventories: if expected profits are above expected interest
rate and there is a small amount of inventories, then the firm increases target
leverage, and viceversa. Banks set their credit supply depending on their net
worth, deposits, the quantity of money provided by the central bank, and on
some regulatory constraints.
2.2 Labour Market
Government, firms and households interact in the labour market. On the demand
side, first of all, the government hires a fraction of households. The remaining
part is available as workers in the private sector. Firms' labour demand depend
on available funds, that is net worth and bank credit.
On the supply side each worker posts a wage which increases if he/she was
employed in the previous period, and viceversa. Moreover, the required wage has
a minimum related to the price of a good.
As a result of the decentralised matching between labour supply and demand,
a fraction of households may remain unemployed. The wage of unemployed peo-
ple is set equal to zero.
2.3 Goods Market
Households and firms interact in the goods market. On the demand side, house-
holds set the desired consumption on the basis of their disposable income and
wealth as follows:
c
ht
=
c
1
·
A
c
ht
w
ht
+
c
2
·
(1)
where
w
ht
is the wage gained by household
h
,0
<c
1
≤
1 is the propensity to
consume current income, 0
1 is the propensity to consume the wealth
A
ht
. In this paper, we add the parameter
c
3
, that was implicitly equal to 1 in [9].
Accordingly, for 0
<c
3
<
1 consumption increases less than proportionally whith
wealth, that is the saving rate is higher for wealthier agents. We will investigate
the role of the parameter
c
3
below, by means of computer simulations, trying to
assess the effects of heterogeneous consumption behaviours on macroeconomic
dynamics. In particular we consider two different scenarios, one with
c
3
=1,
≤
c
2
≤
