Demand deficiency, money velocity and heterogeneity

Artikel

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.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Journal: The Central European Review of Economics and Management (CEREM) ; ISSN: 2544-0365 ; Volume: 4 ; Year: 2020 ; Issue: 2 ; Pages: 137-153 ; Wrocław: WSB University in Wrocław

Klassifikation und Themen

• Klassifikation: Wirtschaft
• Thema: Demand Deficiency ; Money Velocity ; Heterogeneity ; Wealth Distribution ; Agent Based Modelling

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Basci, Sidika ; Gherbi, Tahar
• Ereignis: Veröffentlichung
• (wer): WSB University in Wrocław
• (wo): Wrocław
• (wann): 2020

Weitere Informationen

• DOI: doi:10.29015/cerem.865
• Handle: http://hdl.handle.net/10419/229824
• Letzte Aktualisierung: 20.09.2024, 08:25 MESZ