Harrodian instability in decentralized economies: An agent-based approach

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: LEM Working Paper Series ; No. 2017/17

Classification and Topics

• Classification: Wirtschaft ; General Aggregative Models: Keynes; Keynesian; Post-Keynesian ; Macroeconomics: Consumption, Saving, Production, Employment, and Investment: Forecasting and Simulation: Models and Applications
• Subject: Harrodian Instability ; Agent-Based Models ; Coordination Failures ; Heterogeneous Expectations ; Neo-Kaleckian model

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Russo, Emanuele
• Event: Veröffentlichung
• (who): Scuola Superiore Sant'Anna, Laboratory of Economics and Management (LEM)
• (where): Pisa
• (when): 2017

Further information

• Handle: http://hdl.handle.net/10419/174567
• Last update: 10.03.2025, 11:44 AM CET