Chaos, granularity, and instability in economic systems of countries with emerging market economies: relationships between GDP growth rate and increasing internal inequality

Marco Desogus and Elisa Casu

MPRA Paper from University Library of Munich, Germany

Abstract: Starting from empirical observations of macroeconomic data from emerging market economies recorded in the second decade of the 2000s, an economic analysis was conducted on these economies’ prerogatives and prospects, with special attention given to possible risks of systemic instability and the general soundness of their social and socio-economic structures. These assessments seem particularly relevant, not only for the countries in question, but because of their growing influence in determining international economic balance in the network of relations with developed countries at large. Indeed, alongside good performance trends in production growth, distribution of new wealth that has exacerbated inequalities can be discerned. Moreover, emerging countries’ economic policies often show a general accommodation to the sole objective of production growth, whilst neglecting to maintain equilibrium within the combined arrangement of all (other) macroeconomic variables. Hence, at first we investigated the constitutive dynamics of these phenomena, using an income diffusion model based on a Pareto probability distribution, then on rheology for the analysis of the peculiar new wealth flows distributed over these countries’ populations as well as any spontaneous redistribution effects induced by transactions among resident agents. At that point, applying the Dynamic New Keynesian model, we represented the system and studied solutions. Finally, we offer a proposal for constant government monitoring of each system, adopting control procedures capable of intervening – by way of economic and monetary policy instruments – where trends showed certain critical levels of instability in the economic system, which are observable from the trajectory diagrams.

Keywords: Emerging Market Economies; Macroeconomic Dynamics; Monetary Policy Control; Wealth Distribution; Local Stabilization Systems (search for similar items in EconPapers)
JEL-codes: C02 C61 E01 E63 O47 (search for similar items in EconPapers)
Date: 2022, Revised 2022
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Published in Journal of International Business and Economics 4.22(2022): pp. 5-25

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