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Non-Local Macroeconomic Transactions and Credits-Loans Surface-Like Waves

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  • Victor Olkhov
Abstract
This paper describes surface-like waves of macroeconomic Credits-Loans transactions on economic space. We use agent's risk ratings as their coordinates and describe evolution of macro variables by transactions between agents. Aggregations of agent's variables with risk coordinates x on economic space define macro variables as function of x. Aggregations of transactions between agents at point x and y determine functions of two variables (x,y) on economic space. As example we study Credits transactions provided from agents at point x to agents at point y and thus amount of Loans received by agents at point y from agents at point x at moment t during time term dt. We model evolution of macro transactions by hydrodynamic-like equations. Agents fill macro domain on economic space that is bounded by minimum risk ratings of most secure and maximum risk ratings of most risky agents. Economic and financial shocks can disturb steady borders of macro domain and cause perturbations of transactions. Such disturbances can generate waves that can propagate along risk borders alike to surface waves in fluids. As example, we describe simple model interactions between two transactions by hydrodynamic like equations in a closed form. We introduce notions of "macro accelerations" and their potentials that establish steady state distributions of transactions on economic space. For this model in linear approximation we describe surface-like waves and show that perturbations induced by surface-like waves can exponentially grow up inside macro domain and induce macro instabilities in a low risk area. Description of possible steady state distributions of transactions and surface-like waves on economic space might be important for macro modeling and policy-making.

Suggested Citation

  • Victor Olkhov, 2017. "Non-Local Macroeconomic Transactions and Credits-Loans Surface-Like Waves," Papers 1706.07758, arXiv.org.
    • Handle: RePEc:arx:papers:1706.07758
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    References listed on IDEAS

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    1. Brunnermeier, Markus & Sannikov, Yuliy, 2016. "Macro, Money and Finance: A Continuous Time Approach," CEPR Discussion Papers 11329, C.E.P.R. Discussion Papers.
    2. Brunnermeier, M.K. & Sannikov, Y., 2016. "Macro, Money, and Finance," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 1497-1545, Elsevier.
    3. Olkhov, Victor, 2016. "On Economic Space notion," International Review of Financial Analysis, Elsevier, vol. 47(C), pages 372-381.
    4. Victor Olkhov, 2017. "Econophysics Macroeconomic Model," Papers 1701.06625, arXiv.org.
    5. Victor Olkhov, 2017. "Econophysics of Macroeconomics: "Action-at-a-Distance" and Waves," Papers 1702.02763, arXiv.org.
    6. Olkhov, Victor, 2017. "Quantitative wave model of macro-finance," International Review of Financial Analysis, Elsevier, vol. 50(C), pages 143-150.
    7. Olkhov, Victor, 2016. "Finance, risk and economic space," MPRA Paper 87172, University Library of Munich, Germany.
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    Cited by:

    1. Victor Olkhov, 2018. "Econophysics Beyond General Equilibrium: the Business Cycle Model," Papers 1804.04721, arXiv.org.
    2. Victor Olkhov, 2017. "Econophysics of Business Cycles: Aggregate Economic Fluctuations, Mean Risks and Mean Square Risks," Papers 1709.00282, arXiv.org.

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