Macroeconomic Relaxation: Adjustment Processes of Hierarchical Economic Structures

Raymond J. Hawkins, Masanao Aoki
2009 Economics : the Open-Access, Open-Assessment e-Journal  
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more » ... von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract We show how time-dependent macroeconomic response follows from microeconomic dynamics using linear response theory and a time-correlation formalism. This theory provides a straightforward approach to time-dependent macroeconomic model construction that preserves the heterogeneity and complex dynamics of microeconomic agents. We illustrate this approach by examining the relationship between output and demand as mediated by changes in unemployment, or Okun's law. We also demonstrate that time dependence implies overshooting and how this formalism leads to a natural definition of economic friction. Special issue Reconstructing Macroeconomics JEL: A12, C31, D50, E24, J21 . 4 A similar response to representative-agent based macroeconomics is the closely related literature of agent-based computational economics and finance which also uses stochastic heterogeneous agents to generate macro observables. For a discussion of the current state of agent-based computational macroeconomics see Tesfatsion (2006) , Axtel (2006) and references therein: particularly Tesfatsion and Judd (2006) . A similar view of financial markets can be found in LeBaron (2006) and Samanidou et al. (2007) . 5 See, for example, Dattagupta (1987). www.economics-ejournal.org Economics: The Open-Access, Open-Assessment E-Journal where M U = 1/J U and M R = 1/J R . As illustrated in the lower panel of Fig. 1 a step change in output results in an immediate change in demand that overshoots the equilibrium level followed by an adjustment back to that level.
doi:10.5018/economics-ejournal.ja.2009-17 fatcat:zfhkfql7lnc6jojk4m5q5kltsu