Related papers: An Economical Business-Cycle Model
In a continuous time stochastic economy, this paper considers the problem of consumption and investment in a financial market in which the representative investor exhibits a change in the discount rate. The investment opportunities are a…
Proceeding from the concept of rational expectations, a new dynamic model of supply and demand in a single market with one supplier, one buyer, and one kind of commodity is developed. Unlike the cob-web dynamic theories with adaptive…
We develop a framework based on microeconomic theory from which the ideal gas like market models can be addressed. A kinetic exchange model based on that framework is proposed and its distributional features have been studied by considering…
During the last decades particular effort has been directed towards understanding and predicting the relevant state of the business cycle with the objective of decomposing permanent shocks from those having only a transitory impact on real…
The Lucas critique has exposed the problem of the trade-off between changes in monetary policy and structural breaks in economic time series. The search for and characterisation of such breaks has been a major econometric task ever since.…
Modern macroeconomic theories were unable to foresee the last Great Recession and could neither predict its prolonged duration nor the recovery rate. They are based on supply-demand equilibria that do not exist during recessionary shocks.…
By treating the financial market as a thermodynamic system, we establish a one-to-one correspondence between thermodynamic variables and economic quantities. Measured by the expected loss under the worst-case scenario, financial risk caused…
We present a minimal agent-based model of interacting agents characterized by their wealth to study taxation and inequality in a non-conservative economy. Wealth evolves through an extremal stochastic replacement process in which the…
The aim of this paper is to reemphasize the money theory of exchange which is centered on the function of exchange medium of money, and make a contribution towards linearization of the quantity equation of exchange. A dynamical quantity…
Econophysics provides a strategy for understanding the potential mechanisms underlying the anomalous distribution of wealth found in real societies. We present a computational nonlinear stochastic model for the distribution of wealth that…
Physical concepts developed to describe instabilities in traffic flows can be generalized in a way that allows one to understand the well-known instability of supply chains (the so-called ``bullwhip effect''). That is, small variations in…
We study a class of heterogeneous agent-based models which are based on a basic set of principles, and the most fundamental operations of an economic system: trade and product transformations. A basic guiding principle is scale invariance,…
We describe a simple model for speculative trading based on adaptive behavior of economic agents.The adaptive behavior is expressed through a feedback mechanism for changing agents' stock-to-bond ratios, depending on the past performance of…
We introduce an agent-based model, in which agents set their prices to maximize profit. At steady state the market self-organizes into three groups: excess producers, consumers and balanced agents, with prices determined by their own…
Although classical economic theory is based on the concept of stable equilibrium, real economic systems appear to be always out of equilibrium. Indeed, they share many of the dynamical features of other complex systems, e.g., ecological…
We present a model predictive control (MPC) formulation to directly optimize economic criteria for linear constrained systems subject to disturbances and uncertain model parameters. The proposed formulation combines a certainty equivalent…
Statistical mechanics provides a useful analog for understanding the behavior of complex adaptive systems, including electric power markets and the power systems they intend to govern. Market-based control is founded on the conjecture that…
This paper studies the equilibrium of an extended case of the classical Samuelson's multiplier-accelerator model for national economy. This case has incorporated some kind of memory into the system. We assume that total consumption and…
The Goodwin model of endogenous growth looks to study the dynamic interaction between employment rate and worker's share of national income in an economy. The model is simplistically and elegantly described by a set of differential…
A thermodynamic approach to the description of economic systems and processes is developed. It is shown that there is a deep analogy between the parameters of thermodynamic and economic systems (markets); so each thermodynamic parameter can…