BEGIN:VCALENDAR
VERSION:2.0
PRODID:-//Talks.cam//talks.cam.ac.uk//
X-WR-CALNAME:Talks.cam
BEGIN:VEVENT
SUMMARY:Instabilities in economic network models: Is perfect rationality d
 ynamically stable? - Bonart\, J (Imperial College London)
DTSTART:20141119T140000Z
DTEND:20141119T150000Z
UID:TALK56209@talks.cam.ac.uk
CONTACT:Mustapha Amrani
DESCRIPTION:We study a dynamical model of interconnected firms which allow
 s for certain market imperfections and frictions\, restricted here to be m
 yopic price forecasts and slow adjustment of production. Whereas the stand
 ard rational equilibrium is still formally a stationary solution of the dy
 namics\, we show that this equilibrium becomes linearly unstable in a whol
 e region of parameter space. When agents attempt to reach the optimal prod
 uction target too quickly\, coordination breaks down and the dynamics beco
 mes chaotic. In the unstable\, "turbulent" phase\, the aggregate volatilit
 y of the total output remains substantial even when the amplitude of idios
 yncratic shocks goes to zero or when the size of the economy becomes large
 . In other words\, crises become endogenous. This suggests an interesting 
 resolution of the "small shocks\, large business cycles" puzzle.\n
LOCATION:Seminar Room 2\, Newton Institute Gatehouse
END:VEVENT
END:VCALENDAR