Coupled dynamics with an external system and application to international finance

Gopal K. Basak, Pranab Das () and Allena Rohit

Physica A: Statistical Mechanics and its Applications, 2019, vol. 520, issue C, 409-432

Abstract: The paper develops a generalized model of coupled dynamics for addressing the choice theoretic problems of economics and other behavioural sciences. The model extends the framework of coupled system to include an external sector that generates a richer dynamics. The model is applied to explain foreign capital inflow from the developed to the developing countries. Under certain regularity conditions, the existence of the solutions to the dynamic choice problem is proved and they are then obtained by numerical technique because of the non-linearity of the related functions. Robustness results are achieved via additional simulations by perturbation of the baseline parameter values.

Keywords: Coupled dynamics; Capital inflow; Dynamic programming principle; Portfolio theory; E–M algorithm; Dynamic terms of trade (search for similar items in EconPapers)
JEL-codes: C61 E44 E47 F32 F34 F42 G11 (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:520:y:2019:i:c:p:409-432

DOI: 10.1016/j.physa.2019.01.012

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