Inequality and imbalances: a monetary union agent-based model

  • Alberto CardaciEmail author
  • Francesco Saraceno
Regular Article


Our paper investigates the impact of rising inequality in a two-country macroeconomic model with an agent-based household sector characterized by peer effects in consumption. In particular, the model highlights the role of inequality in determining diverging balance of payments dynamics within a currency union. Inequality may drive the two countries into different growth patterns: where peer effects in consumption interact with higher credit availability, rising income inequality leads to the emergence of a debt-led growth. Where social norms determine weaker emulation and credit availability is lower, an export-led regime arises. Eventually, a crisis emerges endogenously due to the sudden-stop of capital flows from the net lending country, triggered by the excessive risk associated with the dramatic amount of private debt accumulated by households in the borrowing country. Monte Carlo simulations for a wide range of calibrations confirm the robustness of our results.


Inequality Current account Currency union Agent-based model 

JEL Classification

C63 D31 E21 F32 F43 



We are particularly grateful to the participants at the 2016 Complexity Workshop at the University of Hamburg, the 2017 EUROFRAME conference in Berlin, the Conference on “Finance and growth in the aftermath of the crisis” at the University of Milan, and the internal seminars at OFCE, the University of Florence and Lund University. We also thank two anonymous referees for valuable comments and suggestions. This work was supported by the European Community’s Seventh Framework Programme (FP7/2007-2013) under Socio-economic Sciences and Humanities (grant number 320278 - RASTANEWS).


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Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2019

Authors and Affiliations

  1. 1.Complexity Lab in EconomicsUniversità Cattolica del Sacro CuoreMilanItaly
  2. 2.OFCE-SciencesPoParisFrance
  3. 3.LUISS-SEPRomeItaly

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