Behavioral Rationality and Heterogeneous Expectations in Complex Economic Systems
Recognising that the economy is a complex system with boundedly rational interacting agents, the book presents a theory of behavioral rationality and heterogeneous expectations in complex economic systems and confronts the nonlinear dynamic models with empirical stylized facts and laboratory experiments. The complexity modeling paradigm has been strongly advocated since the late 1980s by some economists and by multidisciplinary scientists from various fields, such as physics, computer science and biology. More recently the complexity view has also drawn the attention of policy makers, who are faced with complex phenomena, irregular fluctuations and sudden, unpredictable market transitions. The complexity tools - bifurcations, chaos, multiple equilibria - discussed in this book will help students, researchers and policy makers to build more realistic behavioral models with heterogeneous expectations to describe financial market movements and macro-economic fluctuations, in order to better manage crises in a complex global economy.
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Bifurcations and chaos in 1D systems
Bifurcations and strange attractors in 2D systems
The nonlinear cobweb model
The cobweb model with heterogeneous expectations
An asset pricing model with heterogeneous beliefs
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Behavioral Rationality and Heterogeneous Expectations in Complex Economic ...
Limited preview - 2013
adaptive expectations adaptive learning asset pricing model benchmark bifurcation diagram bifurcation route Brock and Hommes Cantor set Chenciner bifurcation cobweb model coefﬁcient coexisting complex converge cycle deﬁned demand and supply deviations discuss dynamical behavior economic eigenvalues equilibrium price example Figure ﬁnancial ﬁrst ﬁtness measure ﬁxed point forecasting errors forecasting strategies fractions fundamental price fundamental steady fundamental value fundamentalists versus Hénon map heterogeneous expectations heuristics switching model homoclinic orbits homoclinic point Hopf bifurcation increases individual forecasts inﬁnitely initial state x0 intensity of choice invariant circle lags law of motion Lyapunov exponent map f model with heterogeneous negative noise PE ratio period period-doubling bifurcation prediction price dynamics quadratic map rational expectations realized market price realized proﬁts SAC learning sample autocorrelation sample average simple simulations stable 2-cycle stable steady stochastic strange attractor supply curve trader types trend followers type h unstable manifold versus naive expectations