Search

We construct a model of cyclical growth with agent-based features designed to study the network origins of aggregate fluctuations from a demand-side perspective. In our model, aggregate fluctuations result from variations in investment behaviour at firm level motivated by endogenously-generated changes in 'animal spirits'. In addition to being influenced by their own economic conditions, firms pay attention to the performance of first-degree network neighbours, weighted (to differing degrees) by the centrality of these neighbours in the network, when revising their animal spirits. This allows us to analyse the effects of the centrality of linked network neighbours on the amplitude of aggregate fluctuations. We show that the amplitude of fluctuations is significantly affected by the eigenvector centrality, and the weight attached to the eigenvector centrality, of linked network neighbours. The dispersion of this effect about its mean is shown to be similarly important, resulting in the possibility that network properties can result in 'great moderations' giving way to sudden increases in the volatility of aggregate economic performance. • Studies 'granular' origins of aggregate fluctuations in a demand-led economy. • Firms' revision of animal spirits influenced by linked network neighbours. • Firms pay attention to linked network neighbours in accordance with their centrality. • Eigenvector centrality significantly affects the amplitude of aggregate fluctuations. • Dispersion of this effect might explain the onset and demise of 'great moderations'. [ABSTRACT FROM AUTHOR]

Abstract: We propose a simple model where long waves of innovation arise from the endogenous propagation of information among industries. Innovators of each industry invest in internal R&D and eventually in the local search for information. We are going to show that some engage in local search while others do not, depending on the structural parameters of the single industries. By means of the localised search for information, a new technology introduced in a single industry can also be introduced in other industries, leading to a considerable degree of technological correlation, and eventually to long ranged waves of innovation. We also analyse the endogenous balanced growth path of the economy, and the short run fluctuations associated with it. [Copyright &y& Elsevier]