Work detail

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.
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