Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/195721 
Authors: 
Year of Publication: 
2018
Citation: 
[Journal:] International Journal of Financial Studies [ISSN:] 2227-7072 [Volume:] 6 [Issue:] 2 [Publisher:] MDPI [Place:] Basel [Year:] 2018 [Pages:] 1-19
Publisher: 
MDPI, Basel
Abstract: 
The description of the dynamics and fluctuations of macro variables remains one of the most exciting problems of financial economics. This paper models macro variables via the description of transactions between agents. We use risk ratings x of agents as their coordinates in the economic space. Transactions like buy-sell, investment, credits, etc., between agents change their extensive financial and economic variables. Aggregates of transactions between all agents with risk ratings x and y define the macro transactions between points x and y. Macro transactions determine the evolution of macro variables. Interactions between different transactions outline their dynamics and fluctuations. We model macro transactions and the interactions between them by economic hydrodynamic-like equations in the economic space. As an example, for simple model interactions between credit-loans and loans-repayment transactions we derive economic hydrodynamic-like equations and wave equations for near perturbations of macro transactions and study simple wave solutions and their consequences. Waves of macro transactions in the economic space propagate from high to low risk agents or vice versa and define the fluctuations of macro financial variables. The existence and diversity of waves and fluctuations of macro transactions in simple models clarifies the importance of wave processes for macro financial modeling and forecasting.
Subjects: 
macro transactions
macro finance
financial waves
risk ratings
economic space
JEL: 
C00
E00
F00
G00
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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