Dual labor market, financial fragility, and deflation in an agent-based model of the Japanese macroeconomy

Di Guilmi, C; Fujiwara, Y

Dual labor market, financial fragility, and deflation in an agent-based model of the Japanese macroeconomy

Di Guilmi, C

Fujiwara, Y

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Publisher:: Elsevier
Publication Type:: Journal Article
Citation:: Journal of Economic Behaviour & Organization, 2022, 196, pp. 346-371
Issue Date:: 2022-04-01

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Field	Value	Language
dc.contributor.author	Di Guilmi, C https://orcid.org/0000-0001-7786-039X
dc.contributor.author	Fujiwara, Y
dc.date.accessioned	2023-01-24T12:52:46Z
dc.date.available	2023-01-24T12:52:46Z
dc.date.issued	2022-04-01
dc.identifier.citation	Journal of Economic Behaviour & Organization, 2022, 196, pp. 346-371
dc.identifier.issn	0167-2681
dc.identifier.issn	1879-1751
dc.identifier.uri	http://hdl.handle.net/10453/165415
dc.description.abstract	The paper presents a stock-flow-consistent hybrid macro-agent-based model estimated on Japanese data to study the interdependency among the dual labor market, output, and wage dynamics. By modeling the use of secondary workers as a financial buffer for non- financial firms, the paper investigates the possible impact of uncertainty and financial fragility on inflation and the weakening of the trade off between inflation and unemploy- ment. The paper also contributes to the recent developments in the estimation of agent- based models by presenting an original technique, which relies on the identification and optimization of surrogate models. The numerical results show that the elasticity of firms’ hiring choices to volatility in demand is the main behavioral factor affecting both inflation and the Phillips curve, revealing that uncertainty can have consequences also on prices and not only on real variables as already discussed by the literature. Inflation and Phillips curve are also influenced by the bargaining power of workers and by the indexation of minimum wages, while conventional monetary policy and fiscal policy have limited ef- fects. Unconventional monetary policy can have unintended deflationary consequences, by allowing financially distressed firms, which are more likely to resort to secondary workers, to survive.
dc.language	English
dc.publisher	Elsevier
dc.relation.ispartof	Journal of Economic Behaviour & Organization
dc.relation.isbasedon	10.1016/j.jebo.2022.02.003
dc.rights	info:eu-repo/semantics/closedAccess
dc.subject	1401 Economic Theory, 1402 Applied Economics, 1403 Econometrics
dc.subject.classification	Economics
dc.title	Dual labor market, financial fragility, and deflation in an agent-based model of the Japanese macroeconomy
dc.type	Journal Article
utslib.citation.volume	196
utslib.location.activity	Macquarie University
utslib.for	1401 Economic Theory
utslib.for	1402 Applied Economics
utslib.for	1403 Econometrics
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Faculty of Business/Economics Discipline
utslib.copyright.status	closed_access	*
pubs.consider-herdc	true
dc.date.updated	2023-01-24T12:52:43Z
pubs.publication-status	Published
pubs.volume	196

Abstract:

The paper presents a stock-flow-consistent hybrid macro-agent-based model estimated on Japanese data to study the interdependency among the dual labor market, output, and wage dynamics. By modeling the use of secondary workers as a financial buffer for non- financial firms, the paper investigates the possible impact of uncertainty and financial fragility on inflation and the weakening of the trade off between inflation and unemploy- ment. The paper also contributes to the recent developments in the estimation of agent- based models by presenting an original technique, which relies on the identification and optimization of surrogate models. The numerical results show that the elasticity of firms’ hiring choices to volatility in demand is the main behavioral factor affecting both inflation and the Phillips curve, revealing that uncertainty can have consequences also on prices and not only on real variables as already discussed by the literature. Inflation and Phillips curve are also influenced by the bargaining power of workers and by the indexation of minimum wages, while conventional monetary policy and fiscal policy have limited ef- fects. Unconventional monetary policy can have unintended deflationary consequences, by allowing financially distressed firms, which are more likely to resort to secondary workers, to survive.

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http://hdl.handle.net/10453/165415