Financial instability on space: a monetary approach of the regional economic dynamic

This essay aims to analyses the relationship between monetary variables and the spatial distribution of productive activities in a context of non-neutrality of money. The methodology is based on construction and computational implementation of an agent based model which links the productive sector with the financial side of the economy. The productive sector is characterized by imperfect competition (economies of scale and asymmetric product differentiation) and the financial market by speculative behaviors determined by liquidity preference. Among the results, an endogenous instability is observed with impacts on the inter-regional distribution of economic activities. The model reproduces an important stylized fact in regional economics, the Zipf Law, and suggests the need of introducing differentiated regional components in monetary policy.

Region; Money; Agents