Quantitative wave model of macro-finance

Victor Olkhov

International Review of Financial Analysis, 2017, vol. 50, issue C, 143-150

Abstract: This paper presents macro-finance as ensemble of economic agents and suggests use risk ratings of economic agents as their coordinates on economic space. Financial variables of separate economic agents are defined as functions of time and coordinates on economic space. Aggregations of financial variables of separate economic agents with coordinates near point x on economic space define macro-financial variables as function of x. Hydrodynamic-like equations describe evolution and mutual dependence between macro-financial variables. As example, for simple model of mutual dependence between macro-financial Demand on Investment and Interest Rate we derive hydrodynamic-like equations in a closed form. Perturbations of macro financial variables can generate waves those propagate on economic space and we derive wave equations. Macro financial waves can propagate on economic space with exponential growth of amplitudes and cause time fluctuations of finance variables that may model financial and business cycles. Variety of macro financial waves on economic space gives new look on internal dynamics of macro finance and reveals hidden complexity of macro financial modeling and forecasting.

Keywords: Macro-finance modeling; Risk ratings; Economic space; Wave equations (search for similar items in EconPapers)
JEL-codes: C00 E00 F00 G00 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:50:y:2017:i:c:p:143-150

DOI: 10.1016/j.irfa.2017.02.011

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