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We characterize the evolution over time of a credit network as a system of coupled stochastic processes, each one of which describes the dynamics of individual financial robustness. The coupling comes from the connectivity of the network, since each agents' financial robustness is associated with the financial robustness of the partners through risk(More)
In this paper we discuss a scaling approach to business fluctuations. Our starting point consists in recognizing that concepts and methods derived from physics have allowed economists to (re)discover a set of stylized facts which have to be satisfactorily accounted for in their models. Standard macroeconomics, based on a reductionist approach centered on(More)
We present a simple model of a production network in which firms are linked by supplier–customer relationships involving extension of trade–credit. Our aim is to identify the minimal set of mechanisms which reproduce qualitatively the main stylized facts of industrial demography, such as firms' size distribution, and, at the same time, the correlation, over(More)
In this paper we sketch some reflections on the pitfalls and inconsistencies of the research program—currently dominant among the profession—aimed at providing microfoundations to macroeconomics along a Walrasian perspective. We argue that such a methodological approach constitutes an unsatisfactory answer to a well-posed research question, and that(More)
Integration of global financial markets was supposed to lead to greater financial stability, as risks were spread around the world. The financial crisis has thrown doubt on this conclusion. A failure in one part of the global economic system caused a global " meltdown. " The recent crisis has shown that in the absence of appropriate government intervention,(More)
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(More)
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 (U firms) in fact, is constrained by the availability of internal finance—proxied by net worth—to the D firms.(More)
We analyze the properties of a three-sector network economy characterized by credit relationships connecting downstream and upstream firms (inside credit) and credit relationships connecting firms and banks (outside credit). The network topology changes over time due to an endogenous process of partner selection (the preferred-partner choice rule). The(More)