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A new approach to business fluctuations: heterogeneous interacting agents, scaling laws and financial fragility

Domenico Delli Gatti·Corrado Di Guilmi·Edoardo Gaffeo·Gianfranco Giulioni·Mauro Gallegati·Antonio Palestrini
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Abstract

In this paper we discuss a scaling approach to business fluctuations. Our starting point consists in recognizing that concepts and methods derived from physics have allowed economists to (re)discover a set of stylized facts which have to be satisfactorily accounted for in their models. Standard macroeconomics, based on a reductionist approach centered on the representative agent, is definitely badly equipped for this task. On the contrary, we show that a simple financial fragility agent-based model, based on complex interactions of heterogeneous agents, is able to replicate a large number of scaling type stylized facts with a remarkable high degree of statistical precision.

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Domenico Delli Gatti, Corrado Di Guilmi, Edoardo Gaffeo, Gianfranco Giulioni, Mauro Gallegati, Antonio Palestrini. 2003-12-03. A new approach to business fluctuations: heterogeneous interacting agents, scaling laws and financial fragility. https://arxiv.org/abs/cond-mat/0312096

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