Financial Stability, Macroeconomic Cycles and Complex Expectation Dynamics

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Title: Financial Stability, Macroeconomic Cycles and Complex Expectation Dynamics
Authors: Hartmann, Florian
Thesis advisor: Prof. Dr. Valeriya Dinger
Thesis referee: Prof. Dr. Bernd Meyer
Abstract: The thesis tries to shed light on mechanisms that endanger the macro-financial stability of economies. For that purpose a modeling framework is set-up which allows for cyclical behavior on the macro level and does not automatically enforce monotonic convergence of the dynamics to a stable equilibrium. Thus, the assumption of rational expectation must be replaced by alternative expectation formation schemes which are more relevant from an empirical point of view. We start to put forth a modeling approach of a partial, but crucially important market for the whole economy. As we could learn from the great recession, activities in the housing market can trigger economy-wide crises when financial markets are highly interconnected and exert a lasting impact on real markets. The next step is to construct an integrated macro model which captures the interaction of real and financial markets with respect to possible destabilizing linkages. Policy instruments can work then as remedies as long as they are designed in a manner that takes account of the underlying feedback structure. Step by step the models are extended throughout the chapters by refinement of the macro-financial structure. A banking sector is introduced and many issues arising with this addition are discussed. After having addressed several configurations of the banking sector, the focus is shifted to the expectation formation of agents. Behavioral traders on the micro level then drive complex dynamics on the macro level, which eventually feedback on the distribution of different types of trading strategies. We also investigate the implications of such behavioral expectation formations for open economies. Finally, we look at potential instabilities that arise from the supply side of macroeconomies in the long run. A model with a differentiated labor market structure and an accumulation mechanism is used to display distributive cycle dynamics and their stability implications.
URL: https://repositorium.ub.uni-osnabrueck.de/handle/urn:nbn:de:gbv:700-2018020716589
Subject Keywords: Macroeconomics; Monetary Economics; Heterogenous Expectations; Complex Dynamics; Business Cycle; Banking; Housing Market; Labour Market
Issue Date: 7-Feb-2018
Type of publication: Dissertation oder Habilitation [doctoralThesis]
Appears in Collections:FB09 - E-Dissertationen

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