Berlin 2015 – scientific programme

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SOE: Fachverband Physik sozio-ökonomischer Systeme

SOE 22: Economic Models

SOE 22.6: Talk

Thursday, March 19, 2015, 16:15–16:30, MA 001

Cycles and phases of prosperity and depression in an agent-based macroeconomic system with financial markets — •Wenzhi Zheng and Yu Chen — Department of Human and Engineered Environmental Studies, the Graduate School of Frontier Science, the University of Tokyo, Kashiwa City, Chiba ken, Japan

The operation of market-based economy today is strongly fueled by the financial system. As in the prosperity, growing demands and enough capacity to produce keep the development of the economy. Meanwhile huge amounts of credit is created and the boom of asset and equity price create even more virtual wealth. This process usually would not last long. After the prosperity, people have to suffer dramatic fluctuations which may hurt the economy for a short period, like several crashes in the U.S.A, or for decades, like which is happening in Japan. However, traditional macroeconomics overlooks the important interactions between the economy and the financial system. In this work, we will introduce an agent-based economy in which the financial system plays a significant role. In the model, while the financial system accelerates the growth of economy, it also induces short-term and long-term cycles. In this perspective, Japan is just in a long-term recession phase in which strong financial stimulus is not the solution to reactivate the economy. At last, we will try to give policy advice for economies falling into different phases for different reasons based on effective control parameter in our model.