Essays on Macroeconomic Dynamics - A Complex System Perspective

This thesis analyzes different properties of the business cycles by means of three different approaches, all of them under a complexity perspective and all of them grasping a particular aspect of the business cycle. Chapter 2 grasps some aspects of the business cycle from an empirical viewpoint. Indeed with this paper we investigate about the causal relations between public debt, private debt and economic performance, finding that one of the sources of the recent financial and economic crisis has been the outstandingly huge increase in mortgage credit during the 2000-2007 period. This paper also provides additional evidence of the beneficial effects that expansionary fiscal policy might have on output via the investment and the consumption channels -- i.e. via the presence of crowding-in effects. In chapter 3, we capture some features of the business cycle from a fully theoretical perspective. This paper, shows which are the effects that local interaction and heterogeneity have on the aggregate macroeconomic outcome when a supply shock hits the economy. By means of a very stylized agent-based model that contains characteristics and effects typically found in DSGE models, we reveal that the full-employment equilibrium might be locally stable or unstable according to the level of decentralization of the economy, which also is linked to the level of micro level heterogeneity that emerges. Moreover, we show that Keynesian demand shortages might emerge due to coordination failures, driving toward unpleasant (sub-efficient) aggregate outcomes with involuntary unemployment. Finally, the last paper, discussed in chapter 4, by integrating the empirical tools adopted in the first paper and a theoretical framework similar to the one developed in the second paper, captures some causal evidence on the business cycles and on the ability of simulated models to replicate and to explain it. This paper is both methodological and practical. First because it proposes an innovative approach to the validation issue; second because it applies this new approach to one among the most prominent models of the agent-based macroeconomic community. This paper, also establishes a reference point for future research and for other policy oriented agent-based models.