Multi-country ABM perspective on business cycles and deleveraging crises
| Author: | Mgr. Alexander Mačejovský |
|---|---|
| Year: | 2022 - summer |
| Leaders: | PhDr. Jiří Kukačka Ph.D. |
| Consultants: | |
| Work type: | Economic Theory Masters |
| Language: | English |
| Pages: | 108 |
| Awards and prizes: | Deloitte Outstanding Thesis Award. |
| Link: | https://dspace.cuni.cz/handle/20.500.11956/176847 |
| Abstract: | We contribute to the existing literature on macroeconomic impacts of wage exibility by examining complexly interacting open economies which undergo economic crises characterized by debt-de ation. More generally, consideration of complexity of interactions and feedback e ects between trading countries in our model also constitutes an interesting contribution to the literature on open economies, which usually utilizes small open economy models. We utilize multi-country agent-based model with decentralized markets which produces endogenous economic crises characterized by de ation and excessive levels of private debt. We examine scenarios with di erent international trade settings and sizes of countries. We nd that under almost all scenarios, more stable wages have stabilizing macroeconomic e ects as demand-driven recovery is faster and smoother than the one driven by increased margins of rms and consequent debt deleveraging. Moreover, if countries with di erent levels of wage exibilities trade with each other, recessions in the country with more exible wages become milder as international trade helps to increase sales of crisis-hit rms without initiating crisis of a similar severity abroad. Meanwhile, economies of large countries have strong impact on economies of their small trading partners and are considerably more stable. Their rms are in times of crises able to ooad excessive supply abroad with considerable negative impact on the small country's rms' sales, while the analogous e ects in the opposite case are signi cantly less powerful. |
