ABE • Formulas Anatomy

Macro: Paper: A new approach to business fluctuations Heterogeneous Interacting Agents

K_it

Capital stock of firm i at time t

A_it

Net worth (equity) of firm i at time t

L_it

Bank liabilities (loans) of firm i at time t

Y_it

Output produced by firm i at time t

π_it

Profit of firm i at time t

φ

Capital productivity (output per unit of capital)

u_it

Idiosyncratic price shock multiplier for firm i

P_t

Average market price in the economy at time t

g

Variable cost factor (>1, includes adjustment costs)

r_it

Real interest rate paid by firm i on capital and loans

c

Bankruptcy cost weight parameter

K^d_it

Desired capital stock for firm i at time t (optimal level)

I_it

Investment (new capital) by firm i at time t

L_t

Total bank credit supply at time t

E_t

Total banking sector equity base at time t

ν

Bank risk coefficient (inverse of leverage multiplier)

λ

Weight on firm equity share in bank credit allocation

ω

Interest rate markup (spread) banks apply

N_t^entry

Number of new entrant firms at time t

d

Entry process constant parameter (baseline entry)

e

Entry sensitivity parameter (reaction to interest rates)

B_it

Bad debt generated if firm i goes bankrupt

π_t^B

Total bank profit at time t

A_t^s

System-wide total equity at time t (sum over all firms)

K_t^s

System-wide total capital at time t (sum over all firms)