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Financial Stability, Macroeconomic Cycles and Complex Expectation DynamicsHartmann, Florian 07 February 2018 (has links)
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.
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