Business fluctuations in a credit-network economy

Details Business fluctuations in a credit-network economy Business fluctuations in a credit-network economy

2010-06-17

arxiv.org/abs/1006.3521v1

Physica A: Statistical Mechanics and its Applications, Vol: 370, Issue: 1, 1 October 2006, pp: 68-74

Economy

Quantitative Finance

General Finance

Scientific paper

We model a network economy with three sectors: downstream firms, upstream firms, and banks. Agents are linked by productive and credit relationships so that the behavior of one agent influences the behavior of the others through network connections. Credit interlinkages among agents are a source of bankruptcy diffusion: in fact, failure of fulfilling debt commitments would lead to bankruptcy chains. All in all, the bankruptcy in one sector can diffuse to other sectors through linkages creating a vicious cycle and bankruptcy avalanches in the network economy. Our analysis show how the choices of credit supply by both banks and firms are interrelated. While the initial impact of monetary policy is on bank behaviour, we show the interactive play between the choices made by banks, the choices made by firms in their role as providers of credit, and the choices made by firms in their role as producers.

Affiliated with

Also associated with

No associations

Rating

Business fluctuations in a credit-network economy does not yet have a rating. At this time, there are no reviews or comments for this scientific paper.

If you have personal experience with Business fluctuations in a credit-network economy, we encourage you to share that experience with our LandOfFree.com community. Your opinion is very important and Business fluctuations in a credit-network economy will most certainly appreciate the feedback.

Rate now

Comments { 0 }

Profile ID: LFWR-SCP-O-552615