Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/174567
Authors: 
Russo, Emanuele
Year of Publication: 
2017
Series/Report no.: 
LEM Working Paper Series 2017/17
Abstract: 
This paper presents a small-scale agent-based extension of the so-called neo-Kaleckian model. The aim is to investigate the emergence of Harrodian instability in decentralized market economies. We introduce a parsimonious microfoundation of investment decisions. Agents have heterogeneous expectations about demand growth and set idiosyncratically their investment expenditures. Interactions occur through demand externalities. We simulate the model under different scenarios. First, when heterogeneity is ruled out, Harrodian instability is showed to emerge as for the aggregate model. Instead, when heterogeneity is accounted for, a stable dynamics with endogenous fluctuations arises. At the same time, in this second scenario, all the Keynesian implications are preserved, including the presence of macroeconomic paradoxes. Sensitivity analysis confirms the general robustness of our results and the logical consistency of the model.
Subjects: 
Harrodian Instability
Agent-Based Models
Coordination Failures
Heterogeneous Expectations
Neo-Kaleckian model
JEL: 
E03
E12
E27
Document Type: 
Working Paper

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