Income distribution and debts in a fragile economy: market processes and macro constraints

The purpose of the paper is to study fluctuations in a fragile economy, where the role of debt and income distribution is considered. It is based upon a macro approach that emphasizes interactions between market processes and macro constraints within an uncertain environment. By utilizing a regime switching approach, where behavioural functions change when a threshold is violated, robust dynamics can be generated. The model can mimic some aspects of the present evolution of the world economy by means of simulations. Copyright Springer-Verlag 2013