The dynamics of the NAIRU model with two switching regimes

We consider a model of inflation and unemployment proposed in Ferri et al. (JEBO, 2001), in which the dynamics are described by a discontinuous piecewise linear map, made up of two branches. We shall show that the bounded dynamics may be classified in two cases: we may have either regular dynamics with stable cycles of any period or quasiperiodic trajectories, or only chaotic dynamics (pure chaos in which a unique absolutely continuous invariant ergodic measure exists, and structurally stable),in a rich variety of cyclical chaotic intervals. The main results are the analytical formulation of the border collision bifurcation curves, through which we give a complete picture of the possible outcomes of the model.Phillips curve, Regime switching, NAIRU, Nonlinearities, Discontinuous maps.

Dynamic Arbitrage Gaps for Financial Assets

In this paper we are concerned with the existence of a dynamic arbitrage gap that evolves out of an adjustment process for disequilibrium prices, within a complex dynamics framework which takes into account the market microstructure and transactions costs. Although this gap exhibits non linear and chaotic behavior, it doesn’t preclude effective arbitrage transactions from taking place in real markets. Moreover, it may explain much better those factors which usually impede actual perfect arbitrage. Besides, this dynamic arbitrage gap depends upon a truly financial gap that accounts for unexpected events and superior information on the professional dealers´side. In this way, we can learn much more about dynamical adjustment processes from financial assets, making the arbitrage gap instrumental to set about real arbitrage positions. Finally, the dynamic arbitrage gap could become useful when coping with financial crisis as far as some basic parameters´range of values for which the dynamics becomes chaotic could be measured in advance.

Thwarting systems and institutional dynamics or how to stabilize an unstable economy

In this contribution, it is shown that the ambivalence of institutional factors relatively to financial instability appears early in Minsky's first works, more precisely in the late fifties. The argument is developed in two main steps. First, on the basis of Minsky's analysis, I investigate the actual form that fluctuations analysis can take, explicitly including the institutional context that governs interactions between economic agents (I). I then look at the reasons why the stabilizing effects of a given institutional structure are not immutable. In order to remain effective, the institutional structure must, on the contrary, change endogenously in response to actions by private agents in the economy (II).Thwarting systemes, public deficits, central bank, financial innovation, Minsky, financial instability

Money demand and relative prices during episodes of hyperinflation

Inflation (Finance) ; Money ; Prices

Measuring the size of underground economy in Iran with emphasis on the incentives for evasion of insurance premium payment (1961 – 2001)

This paper attempts to estimate the size of underground economy in Iran and to identify the elements having taken a role in the creation of the same for the period 1961-2001 by using modified currency ratio method as a monetary approach to the estimation of the size of underground economy. Regression model has been stipulated with the consideration of special economic circumstances prevailing in Iran. Currency ratio (circulating currency to total private sector bank deposits ratio) has been considered as a function of economic development (per capita income), inflation rate, the degree of urbanization (a measure of the development of financial institutions) and private consumption expenditures. Government expenditures to GDP ratio (a measure of government economic interventions), import tax burden, direct tax burden, social security tax burden and black market foreign exchange rate have been also considered as the indicators and variables reflecting underground economy. The model has been estimated by using an auto-regressive distributed lag (ARDL) method and the results are indicative of a high volume of such activities within the frameworks of the economy of Iran. The mean size of underground economy has been 27.76 percent of GDP during the period of study. Out of all the factors creating the underground economy, the size of government fraction of economy has had the greatest effect and social insurance burden has had the smallest one. Although the increase in insurance burden is in itself a factor in the creation of underground economy, in its turn has a striking negative impact on the performance and stability of social insurance funds.underground economy, ARDL, modified currency ratio, social security contribution evasion, Iran

Value and utility in a historical perspective

Since value and utility are the highest profile abstractions that underlie an epoch’s intellectual climate and ethical principles, their evolution reflects the transformation of socioeconomic conditions and institutions. The “Classical Phase” flourished during the first global system, laissez-faire/metal money/zero multilateralism (GS1); the second, “Subjective/Utilitarian” phase marked the long transition to the current epoch of “Modern Subjectivism/General Equilibrium,” tied to the second and extant global system, mixed economy/minimum reserve banking/weak multilateralism (GS2). History has witnessed the material de-essentialization of value and substantialization of utility. But now the two concepts face a thorough transvaluation as the world’s combined demographic and economic expansion encounters ecological/physical limitations. An extended macrohistoric implosion may lead to a third form of global self-organization: two-level economy/maximum bank reserve money/strong multilateralism (GS3). If history unfolds along the suggested path, not only economics, but also thinking about economics would change. It would be considered an evolving hermeneutic of the human condition expressed through global-system-specific texts. The implied critical alteration, with the recognition of the entropy law’s importance as its focal point, matches the prediction of Swiss thinker Jean Gebser (1905-1973) about the impending mutation of human consciousness into its integral/arational structure. Such extrapolations form the context in which the fourth historical phase of value and utility is hypothesized, leading to the material re-essentialization of value and de-substantialization of utility

Random Walks and Non-Linear Paths in Macroeconomic Time Series: Some Evidence and Implications

This paper investigates whether the inherent non-stationarity of macroeconomic time series is entirely due to a random walk or also to non-linear components. Applying the numerical tools of the analysis of dynamical systems to long time series for the US, we reject the hypothesis that these series are generated solely by a linear stochastic process. Contrary to the Real Business Cycle theory that attributes the irregular behavior of the system to exogenous random factors, we maintain that the fluctuations in the time series we examined cannot be explained only by means of external shocks plugged into linear autoregressive models. A dynamical and non-linear explanation may be useful for the double aim of describing and forecasting more accurately the evolution of the system. Linear growth models that find empirical verification on linear econometric analysis, are therefore seriously called in question. Conversely non-linear dynamical models may enable us to achieve a more complete information about economic phenomena from the same data sets used in the empirical analysis which are in support of Real Business Cycle Theory. We conclude that Real Business Cycle theory and more in general the unit root autoregressive models are an inadequate device for a satisfactory understanding of economic time series. A theoretical approach grounded on non-linear metric methods, may however allow to identify non-linear structures that endogenously generate fluctuations in macroeconomic time series.Random Walks, Real Business Cycle Theory, Chaos

Nonextensive statistics: Theoretical, experimental and computational evidences and connections

The domain of validity of standard thermodynamics and Boltzmann-Gibbs statistical mechanics is discussed and then formally enlarged in order to hopefully cover a variety of anomalous systems. The generalization concerns {\it nonextensive} systems, where nonextensivity is understood in the thermodynamical sense. This generalization was first proposed in 1988 inspired by the probabilistic description of multifractal geometries, and has been intensively studied during this decade. In the present effort, after introducing some historical background, we briefly describe the formalism, and then exhibit the present status in what concerns theoretical, experimental and computational evidences and connections, as well as some perspectives for the future. In addition to these, here and there we point out various (possibly) relevant questions, whose answer would certainly clarify our current understanding of the foundations of statistical mechanics and its thermodynamical implicationsComment: 15 figure