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The Generation of Business Fluctuations

Financial Fragility and Mean-field Interactions

Series:

Corrado Di Guilmi

The limits imposed on economic modeling by the representative agent hypothesis have prevented dynamic analysis from fully exploring the links between the micro and macro level of the economic system. This book presents developments and applications of the innovative techniques of dynamic stochastic aggregation, first proposed by Masanao Aoki, through an implementation in a New Keynesian financial fragility framework. The introduction in macroeconomics of statistical mechanics tools, such as mean-field interaction, statistical entropy and master equation, constitutes a step toward a new definition of microfoundation and allows an integrated modeling of the relationships between micro financial variables and aggregate indicators.
Contents: Business Cycles – Corporate Finance – Stochastic Dynamic Aggregation – Heterogeneous Interacting Agents – Stochastic Diffusion Processes – Statistical Entropy – Master Equation.