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Constant and symmetric price impact functions, most commonly used in agent-based market modelling, are shown to give rise to paradoxical and inconsistent outcomes in the simplest case of arbitrage exploitation when open-hold-close actions…
In this paper, we continue our analysis of spatial versions of agent-based models for the dynamics of money that have been introduced in the statistical physics literature, focusing on two models with debts. Both models consist of systems…
This study aims to identify the leading of inflation indicators of monetary policy in DRC. The results reveal that the most relevant inflation indicators usually come from the monetary origin than the real sector. Variance decomposition…
In this chapter the complex systems are discussed in the context of economic and business policy and decision making. It will be showed and motivated that social systems are typically chaotic, non-linear and/or non-equilibrium and therefore…
We introduce and study a non-equilibrium continuous-time dynamical model of the price of a single asset traded by a population of heterogeneous interacting agents in the presence of uncertainty and regulatory constraints. The model takes…
No matter its source, financial- or policy-related, uncertainty can feed onto itself, inflicting the real economic sector, altering expectations and behaviours, and leading to identification challenges in empirical applications. The strong…
Decentralized Finance (DeFi) has reshaped the possibilities of reserve banking in the form of the Collateralized Debt Position (CDP). Key to the safety of CDPs is the money supply architecture that enables issued debt to maintain its value.…
This paper studies the economic role of persistent dispersion in allocations across agents. We develop a tractable model in which firms allocate resources under imperfect information and behavioral updating, generating sustained…
Assessing the contribution of various risk factors to future inflation risks was crucial for guiding monetary policy during the recent high inflation period. However, existing methodologies often provide limited insights by focusing solely…
The accurate characterization of the business cycles in the nonlinear dynamic financial and economic systems in the time of globalization represents a formidable research problem. The central banks and other financial institutions make…
We study the ex-ante minimization of market inefficiency, defined in terms of minimum deviation of market prices from fundamental values, from a centralized planner's perspective. Prices are pressured from exogenous trading actions of…
The global economy is one of today's major challenges, with increasing relevance in recent decades. A frequent observation by policy makers is the lack of tools that help at least to understand, if not predict, economic crises. Currently,…
I study the optimal regulation of a financial sector where individual banks face self-enforcing constraints countering their default incentives. The constrained-efficient social planner can improve over the unregulated equilibrium in two…
There is a widespread recent interest in using ideas from statistical physics to model certain types of problems in economics and finance. The main idea is to derive the macroscopic behavior of the market from the random local interactions…
This paper examines the impact of US monetary policy tightening on emerging markets, distinguishing between direct and indirect spillover effects using the global vector autoregression with stochastic volatility covering 32 countries. The…
We present and study a Minority Game based model of a financial market where adaptive agents -- the speculators -- interact with deterministic agents -- called producers. Speculators trade only if they detect predictable patterns which…
A minimal central bank credibility, with a non-zero probability of not renegning his commitment ("quasi-commitment"), is a necessary condition for anchoring inflation expectations and stabilizing inflation dynamics. By contrast, a complete…
A stochastic model with a continuum of economic agents often involves shocks at both macro and micro levels. This can be formalized by a continuum of random variables that are conditionally independent given the macro level shocks. Based on…
This short review presents a selected history of the mutual fertilization between physics and economics, from Isaac Newton and Adam Smith to the present. The fundamentally different perspectives embraced in theories developed in financial…
With recent development of artificial intelligence, it is more common to adopt AI agents in economic activities. This paper explores the economic actions of agents, including human agents and AI agents, in an economic game of trading…