Abstract: The purpose of this paper is to study the dynamic behavior of a sequential monetary exchange economy.
Transactions take place sequentially against non-equilibrium prices, there is quantity rationing, and credit or cash are the only means of exchange. Agents have optimistic or pessimistic expectations about quantity constraints which represent their beliefs about future trading opportunities.
In the credit model the agents incur debts along the transition path towards equilibrium, while in the cash-in-advance model convergence takes place without the occurrence of any debts and/or claims. The credit mechanism is shown to act as a `soft' correction mechanism on credit fluctuations, while the cash-in-advance constraint acts as a `hard' negative feedback effect driving prices back towards a neighborhood of a monetary cash-in-avance equilibrium.
Abstract: EURACE is a major European attempt to construct an agent-based model of the European economy with millions of autonomous, purposive agents interacting in a complicated economic environment. To create it, major advances are needed, in particular in terms of economic modeling and software engineering. In this paper, we describe the general structure of the economic model developed for EURACE and present the Flexible Large-scale Agent Modelling Environment (FLAME) that will be used to describe the agents and run the model on massively parallel supercomputers. Illustrative simulations with a simplified model based on EURACE's labor market module are presented.[ PDF (470KB) ]
Abstract: After briefly presenting the main features of EURACE, this paper describes in more detail the newly developed financial management module that intermediates between the real and the financial spheres in EURACE. In a nutshell, this module defines the link between the hiring and investment behavior of the firms as a function of the revenues they obtain by selling their products, of the money they can raise on the credit and financial markets, of their dividend policy, and other major aspects of financial decision-making.[ PDF (145KB) ]
The purpose of this paper is to develop a general equilibrium model with money and trade taking place outside of equilibrium. There are multiple markets which are visited sequentially by the agents and transactions occur at disequilibrium prices along the adjustment path. This implies quantity rationing and we assume that there is a cash-in-advance constraint which limits the agents' ability to transact. The updating of the prices and cash balances makes it necessary for agents to re-optimize their trading plans subject to new information due to substitution and spill-over effects. The dynamics of this disequilibrium price and quantity process are shown to depend crucially on the exchange mechanisms that are imposed. One of the results is that the introduction of a cash-in-advance constraint, although it prevents debts from occurring outside of equilibrium, does not stabilize endogenous fluctuations.
The purpose of this paper is to study the dynamic behavior of a credit economy in which agents use effective demand to signal their desired trades and markets are spatially separated. Transactions take place at non-equilibrium prices, there is quantity rationing and credit is the only means of exchange. Agents can have optimistic or pessimistic expectations about the quantity constraints which allows them to form expectations about future trading possibilities and to take into account that they are being rationed. Agents re-optimize using a moving-horizon optimization scheme similar to closed-loop feedback control. A hysteresis phenomenon is shown to occur when the elasticity of substitution of a CES demand function is increased and then later decreased again. This hysteresis is due to the sequential market structure of the economy.