Increasing inequality,consumer credit and financial fragility in an agent based macroeconomic model |
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Authors: | Alberto Russo Luca Riccetti Mauro Gallegati |
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Institution: | 1.Department of Economics and Social Sciences,Università Politecnica delle Marche,Ancona,Italy;2.Sapienza Università di Roma,Roma,Italy |
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Abstract: | We investigate the interplay between increasing inequality and consumer credit in a complex macroeconomic system with financially fragile heterogeneous households, firms and banks. Simulation results show that there are pros and cons of introducing consumer credit: on the one hand, for a certain time, it leads to lower unemployment through boosting aggregate demand; on the other hand, it accelerates the system tendency to the crisis. Since the increase of financial profits goes with a decline of households’ real wealth, a policy trade-off emerges. |
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