Business Cycles as Collective Risk Fluctuations

Victor Olkhov

MPRA Paper from University Library of Munich, Germany

Abstract: We suggest use continuous numerical risk grades [0,1] of R for a single risk or the unit cube in Rn for n risks as the economic domain. We consider risk ratings of economic agents as their coordinates in the economic domain. Economic activity of agents, economic or other factors change agents risk ratings and that cause motion of agents in the economic domain. Aggregations of variables and transactions of individual agents in small volume of economic domain establish the continuous economic media approximation that describes collective variables, transactions and their flows in the economic domain as functions of risk coordinates. Any economic variable A(t,x) defines mean risk XA(t) as risk weighted by economic variable A(t,x). Collective flows of economic variables in bounded economic domain fluctuate from secure to risky area and back. These fluctuations of flows cause time oscillations of macroeconomic variables A(t) and their mean risks XA(t) in economic domain and are the origin of any business and credit cycles. We derive equations that describe evolution of collective variables, transactions and their flows in the economic domain. As illustration we present simple self-consistent equations of supply-demand cycles that describe fluctuations of supply, demand and their mean risks.

Keywords: business cycle; risk ratings; collective variables; economic flows; economic domain (search for similar items in EconPapers)
JEL-codes: C53 E32 E37 F44 (search for similar items in EconPapers)
Date: 2020-12-08
New Economics Papers: this item is included in nep-mac, nep-rmg and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Working Paper: Business Cycles as Collective Risk Fluctuations (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:104598

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