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The Schelling model of segregation was introduced in economics to show how micro-motives can influence macro-behavior. Agents on a lattice have two colors and try to move to a different location if the number of their neighbors with a…
A financial market is a system resulting from the complex interaction between participants in a closed economy. We propose a minimal microscopic model of the financial market economy based on the real economy's symmetry constraint and…
We propose a model to study the consequences of including financial stability among the central bank's objectives when market players are strategic, and surprises compromise their stability. In this setup, central banks underreact to…
The paper proposes a new stochastic intervention control model conducted in various commodity and stock markets. The essence of the phenomenon of intervention is described in accordance with current economic theory. A review of papers on…
This paper investigates the emergence of wealth inequality through a minimalist kinetic exchange model that incorporates two fundamental economic features: fixed-amount transactions and hard budget constraints. In contrast to the maximum…
The main objective of this paper is to fill a critical gap in the literature by analyzing the effects of decentralization on the macroeconomic stability. A survey of the voluminous literature on decentralization suggests that the question…
This paper studies the transmission of US monetary policy shocks into Emerging Markets emphasizing the role of investment and financial heterogeneity. First, we use a panel SVAR model to show that a US interest tightening leads to a…
A class of heterogeneous agent models is investigated where investors switch trading position whenever their motivation to do so exceeds some critical threshold. These motivations can be psychological in nature or reflect behaviour…
We study mechanism design when a designer repeatedly uses a fixed mechanism to interact with strategic agents who learn from observing their allocations. We introduce a static framework, calibrated mechanism design, requiring mechanisms to…
Assessing the stability of economic systems is a fundamental research focus in economics, that has become increasingly interdisciplinary in the currently troubled economic situation. In particular, much attention has been devoted to the…
The economic shocks that followed the COVID-19 pandemic have brought to light the difficulty, both for academics and policy makers, of describing and predicting the dynamics of inflation. This paper offers an alternative modelling approach.…
This paper presents macroeconomic model that is based on parallels between macroeconomic multi-agent systems and multi-particle systems. We use risk ratings of economic agents as their coordinates on economic space. Aggregates of economic…
In this letter we present a stochastic dynamic model which can explain economic cycles. We show that the macroscopic description yields a complex dynamical landscape consisting of multiple stable fixed points, each corresponding to a split…
We examine whether and how granular, real-time predictive models should be integrated into central banks' macroprudential toolkit. First, we develop a tractable framework that formalizes the tradeoff regulators face when choosing between…
The efficient market hypothesis (EMH), based on rational expectations and market equilibrium, is the dominant perspective for modelling economic markets. However, the most notable critique of the EMH is the inability to model periods of…
We study a large economy in which firms cannot compute exact solutions to the non-linear equations that characterize the equilibrium price at which they can sell future output. Instead, firms use polynomial expansions to approximate prices.…
We provide two methodological insights on \emph{ex ante} policy evaluation for macro models of economic development. First, we show that the problems of parameter instability and lack of behavioral constancy can be overcome by considering…
In this chapter we review some recent results on the dynamics of price formation in financial markets and its relations with the efficient market hypothesis. Specifically, we present the limit order book mechanism for markets and we…
The analysis of financial markets using models inspired by statistical physics offers a fruitful approach to understand collective and extreme phenomena [3, 14, 15] In this paper, we present a study based on a 2D Ising network model where…
A dynamical model is introduced for the formation of a bullish or bearish trends driving an asset price in a given market. Initially, each agent decides to buy or sell according to its personal opinion, which results from the combination of…