New Approaches to Macroeconomic Modeling
Evolutionary Stochastic Dynamics, Multiple Equilibria, and Externalities as Field Effects

This book provides a method for modeling large collections of heterogeneous agents subject to non-pairwise externality called field effects.

Masanao Aoki (Author)

9780521637695, Cambridge University Press

Paperback, published 13 February 1998

308 pages, 9 b/w illus.
23 x 15.3 x 1.9 cm, 0.425 kg

"Economists are indebted to Masanao Aoki. He has done an excellent job in bringing together a large amount of important material on stochastic dynamics, showing economists how to use it, and presenting it all in a clear and readable manner. The examples which he presents are interesting but surely only scratch the surface of what these tools can do to improve the realism and depth of economic modeling, macro and micro." Ken Judd, Hoover Institution, Stanford University

This book contributes substantively to state-of-the-art macroeconomic modeling by providing a method for modeling large collections of heterogeneous agents subject to non-pairwise externality called field effects, i.e. feedback of aggregate effects on individual agents or agents using state-dependent strategies. Adopting a level of microeconomic description which keeps track of compositions of fractions of agents by 'types' or 'strategies', time evolution of the microeconomic states is described by (backward) Chapman-Kolmogorov equations. Macroeconomic dynamics naturally arise by expansion of the solution in some power series of the number of participants. Specification of the microeconomic transition rates thus leads to macroeconomic dynamic models. This approach provides a consistent way for dealing with multiple equilibria of macroeconomic dynamics by ergodic decomposition and associated calculations of mean first passage times, and stationary probabilities of equilibria further provide useful information on macroeconomic behavior.

Part I. Introduction: 1. Introduction
2. Simple illustrative and motivating examples
3. Empirical distributions: statistical laws in macroeconomics
Part II. Modeling Interactions: 4. Modeling interactions I: Jump Markov processes
5. Modeling interactions II: master equations and field effects
6. Modeling interactions III: pairwise and multiple-pair interactions
Part III. Hierarchical Dynamics and Critical phenomena: 7. Sluggish dynamics and hierarchical state spaces
8. Self-organizing and other critical phenomena in economic models
9. Appendices
Symbol Index
Subject Index.

Subject Areas: Econometrics [KCH]