An understanding of how the money market developed is vital because money serves as the blood of an economy. From 1800 to 1937, the Chinese money market transitioned from a highly fragmented bimetallic system to a gradually integrated silver yuan system in tandem with a silver-backed fiduciary paper-money system until a fiat money system was established. As a consequence, the economy became increasingly monetized as the growth rate of the money supply gradually surpassed the overall economic growth rate without evident inflation pressure on general price trends. This development resulted both from the efforts of governments and private institutions in response to various types of shock separately and from the outcomes of competition and co-operation between the two stakeholders over time.

The Brazilian developmental state changed significantly after 1985, with new rhetoric about equality, a commitment to fighting inflation, and a three-pronged policy set combining fiscal responsibility, a floating exchange rate, and inflation targeting. Yet many elements of the “old” developmental state remained intact, including a large state role, a complex monetary regime, muscular industrial policies, low economic integration, and a segmented labor market. The fight against inflation generated incentives for politicians to employ “fiscally opaque” policy instruments drawn from the tool kit of the developmental state. The fiscal imperative combined with fiscally opaque instruments contributed to the high cost of credit and low investment, driving firms to demand state succor. The fiscal imperative and the power of interest groups meant that the burden of balancing the fiscal accounts fell disproportionately on the less well-off. The ensuing demand for social spending meant that economic growth, by default, became a residual.

We describe the structure of the model, built plugging the entry/exit decisions into a macroeconomic system, by using a notion of statistical distribution of expectations that is consistent with the idea of rational expectations (at least in its original formulation) to model the entry decision of potential entrants. The theoretical framework is also useful to analyze, on a theoretical ground, the behavior of the firms’ markups over the cycle and is employed for the agent-based simulations. In particular, we model a macroeconomic system with oligopoly, entry/exit, and heterogeneous individuals. The algebraic framework of a new macro-model is analytically dissected, to prepare a sound basis for the experiments in simulation.

Starting from the equation based construction introduced previously, we builda macroeconomic simulation model of an economic using the agent-based technique; the model is micro-founded and so our explanation starts from the behavior of the agents and of the market frameworks where they behave. The structure of the simulation model is well represented via the sequence oftwelve items. Starting from the model outline reported in the Outline, we develop a detailed description of the steps the simulation undertakes over the time, with the actions of the different kind of agents.

We briefly discuss the rationale and the premises for the theoretical model of the book and how does our theoretical model relate to the existing and related literature. The model describes an economy with an oligopolistic industrial sector and our purpose is to analyze the interactions between the market structure and the macroeconomy – in particular, how does the equilibrium among the oligopolistic firms impact the macroeconomy and how does the macroeconomy impact back on the equilibrium among the oligopolistic firms? We set the premises of the whole work, exploring the theoretical pillars of the relationships between the industrial structure and the macroeconomy.