Threshold behavior and aggregate fluctuation |
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Authors: | Makoto Nirei |
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Affiliation: | Department of Economics, Utah State University, 3530 Old Main Hill, Logan UT 84322, USA |
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Abstract: | This paper concerns a propagation mechanism in an economy where many individuals follow a threshold rule and interact with a positive feedback. We derive an asymptotic distribution of the propagation size when the number of the agents tends to infinity. The propagation distribution exhibits a slower convergence to a deterministic value than it would if the agents followed a smooth adjustment policy. This gives rise to significant aggregate fluctuations in a finite lumpy-adjusting economy even when the agents are hit by small independent shocks. |
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Keywords: | E1 E3 |
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