Network Approach for Detecting Macroeconomic Instability

In this paper we apply a modified version of the fitness network model of Bianconi-Barabàsi (B-B) with a constant number of nodes, to an economic environment composed by credit and interbank networks. Specifically, we implement a dynamic and heterogeneous fitness measure given by banks liquidity. By coupling together the macroeconomic agent-based model of [2] with the (B-B) fitness model, we aim to analyze the effect of the evolving financial interlink ages on the agents´ strategies, driven by the fitness, and the network topology, driven by system temperature. Moreover, we identify the critical threshold where the credit and interbank networks condensate and study the macroeconomic consequences (i.e. Production growth rate, bubbles and volatility clustering) of the phase transition.