Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/57088
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dc.contributor.authorBezemer, Dirken_US
dc.date.accessioned2012-04-12T14:26:37Z-
dc.date.available2012-04-12T14:26:37Z-
dc.date.issued2011en_US
dc.identifier.urihttp://hdl.handle.net/10419/57088-
dc.description.abstractGiven the economy's complex behavior and sudden transitions as evidenced in the 2007-08 crisis, agent-based models are widely considered a promising alternative to current macroeconomic practice dominated by DSGE models. Their failure is commonly interpreted as a failure to incorporate heterogeneous interacting agents. This paper explains that complex behavior and sudden transitions also arise from the economy's financial structure as reflected in its balance sheets, not just from heterogeneous interacting agents. It introduces flow-of-funds and accounting models, which were preeminent in successful anticipations of the recent crisis. In illustration, a simple balance-sheet model of the economy is developed to demonstrate that nonlinear behavior and sudden transition may arise from the economy's balance-sheet structure, even without any microfoundations. The paper concludes by discussing one recent example of combining flow-of-funds and agent-based models. This appears a promising avenue for future research.en_US
dc.language.isoengen_US
dc.publisher|aLevy Economics Institute of Bard College |cAnnandale-on-Hudson, NYen_US
dc.relation.ispartofseries|aWorking paper, Levy Economics Institute |x665en_US
dc.subject.jelB52en_US
dc.subject.jelC63en_US
dc.subject.jelE32en_US
dc.subject.jelE37en_US
dc.subject.jelE44en_US
dc.subject.ddc330en_US
dc.subject.keywordcredit crisisen_US
dc.subject.keywordfinanceen_US
dc.subject.keywordcomplex systemsen_US
dc.subject.keywordDSGEen_US
dc.subject.keywordagent-based modelsen_US
dc.subject.keywordstockflow consistent modelsen_US
dc.titleCauses of financial instabilityen_US
dc.typeWorking Paperen_US
dc.identifier.ppn655726691en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen_US

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