We model a credit network characterized by credit relationships connecting (i) downstream (D) and upstream (U) firms and (ii) firms and banks. The net worth of D firms is the driver of fluctuations. The production of D firms and of their suppliers (Ufirms) in fact, is constrained by the availability of internal finance —proxied by net worth — to the D firms. The structure of credit interlinkages changes over time due to an endogeneous process of partner selection, which leads to the polarization of the network. At the aggregate level, the distribution of growth rates exhibits negative skewness and excess kurtosis. When a shock hits the macroeconomy or a significant group of agents in the credit network a bankruptcy avalanche can follow if agents’ leverage is critically high. In a nutshell we want to explore the properties of a network-based financial accelerator.
The Financial Accelerator in an Evolving Credit Network / DELLI GATTI, D; Gallegati, Mauro; Greenwald, B; Russo, Alberto; Stiglitz, J. E.. - In: JOURNAL OF ECONOMIC DYNAMICS & CONTROL. - ISSN 0165-1889. - STAMPA. - 34:9(2010), pp. 1627-1650. [10.1016/j.jedc.2010.06.019]
The Financial Accelerator in an Evolving Credit Network
GALLEGATI, Mauro;RUSSO, Alberto
;
2010-01-01
Abstract
We model a credit network characterized by credit relationships connecting (i) downstream (D) and upstream (U) firms and (ii) firms and banks. The net worth of D firms is the driver of fluctuations. The production of D firms and of their suppliers (Ufirms) in fact, is constrained by the availability of internal finance —proxied by net worth — to the D firms. The structure of credit interlinkages changes over time due to an endogeneous process of partner selection, which leads to the polarization of the network. At the aggregate level, the distribution of growth rates exhibits negative skewness and excess kurtosis. When a shock hits the macroeconomy or a significant group of agents in the credit network a bankruptcy avalanche can follow if agents’ leverage is critically high. In a nutshell we want to explore the properties of a network-based financial accelerator.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
