Financial shocks and their effects on velocity of money in agent-based model

Abstract The interaction of debt and economic performance has been getting more attention over the last few years. However, models making provision for are still outnumbered by completely ignoring it. This paper is first one to analyze relationship between household (in form bank loans) terms aggregate income) considering both impact wealth income distribution, MPC distribution under various financial shocks. outcomes model velocities calculated as ratios debt. demonstrates how shocks affect velocity money different distributions wealth/income marginal propensity consume across population. For this purpose, an original agent-based simulation with a limited loan supply was designed. Proposed demand, supply, consume, macro-prudential regulatory ratios, real estate capital gains, repayment structure loans provided property transactions. It shown that equal higher money. From shocks, shock new purchases have largest on velocity. generally lowest magnitude.