Empirical evidence shows monetary shocks have two temporary effects on the distribution of prices. One, the dispersion of cross-section of prices increases in response to monetary shocks. Two, some prices change in the 'wrong' direction: some prices decrease in response to positive monetary shocks, and increase in response to negative monetary shocks. We present a model that generates the two effects of monetary shocks on the distribution of prices as an out-of-equilibrium phenomena. Firms are related to each other through a production network. Monetary shocks change the working capital of a subset of firms and percolate to other firms through buyer-seller linkages. Price dispersion increases because the percolation of a monetary shock through the production network causes prices to differentially deviate from their steady state values. Some prices change in the wrong direction because a shift in one firm's demand causes a shift in another firm's supply (and vice-versa), thereby generating complicated chains of bi-directional price changes. Monetary shocks can significantly disturb relative prices even when all prices are fully flexible.
Given the rise of computational power since the beginning of the millennium, agent-based modelling is now a viable option for models capable of capturing the complex nature of an economy. However, the coding implementation can be tedious. Because of this we introduce ABCE, the Agent-Based Computational Economics library. ABCE is an agent-based modeling library for Python that is specifically tailored for economic phenomena. ABCE's core idea is that the modeler specifies the decision logic of the agents, the order of actions, the goods and their physical transformation (the production and the consumption functions). Then, ABCE automatically handles the actions, such as production and consumption, trade and agent interaction. The result is a program where the source code consists of only economically meaningful commands (e.g. decisions, buy, sell, produce, consume, contract, etc.). ABCE scales on multi-core computers, without the intervention of the modeler. The model can be packaged into a nice web application or run in a Jupyter notebook.
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