Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/229824
Authors: 
Basci, Sidika
Gherbi, Tahar
Year of Publication: 
2020
Citation: 
[Journal:] The Central European Review of Economics and Management (CEREM) [ISSN:] 2544-0365 [Volume:] 4 [Issue:] 2 [Year:] 2020 [Pages:] 137-153
Abstract: 
Aim: Money velocity data for the United States show that there is a decline in all of the broad money aggregates in recent decades. This points to a sustained demand deficiency element. Can consumer heterogeneity be the cause of this declining trend? The aim of this paper is to find an answer for this question.   Design / Research Methods: To achieve our aim we use Agent Based Modelling (ABM). In our model, the agents are heterogeneous consumers with different spending propensities.   Conclusions / findings: We show that heterogeneous consumers with different spending propensities alone puts a downward pressure on money velocity. This pressure is coupled with a sustained worsening in the wealth distribution. We observe that as money accumulates in the hands of agents with the lowest propensity to spend, money velocity keeps declining. This also puts a downward pressure on nominal aggregate demand and hence a deflationary bias on the general price level.   Originality / value of the article: This paper shows that heterogeneity of economic agents should not be ignored and that ABM is a very powerful tool to analyse heterogeneity.   Implications of the research: The implication for policy makers is that the demand deficiency associated with the fall in money velocity will persist until the worsening of wealth dispersion comes to a halt.
Subjects: 
Demand Deficiency
Money Velocity
Heterogeneity
Wealth Distribution
Agent Based Modelling
Persistent Identifier of the first edition: 
Creative Commons License: 
https://creativecommons.org/licenses/by-nc-nd/4.0
Document Type: 
Article

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