Abstract

The main finding of this paper is a novel avalanche-size exponent τ ≈ 1.87 when the generalised sandpile dynamics evolves on the real-world Japanese inter-firm network. The topology of this network is non-layered and directed, displaying the typical bow tie structure found in real-world directed networks, with cycles and triangles. We show that one can move from a strictly layered regular lattice to a more fluid structure of the inter-firm network in a few simple steps. Relaxing the regular lattice structure by introducing an interlayer distribution for the interactions, forces the scaling exponent of the avalanche-size probability density function τ out of the two-dimensional directed sandpile universality class τ = 4/3, into the mean field universality class τ = 3/2. Numerical investigation shows that these two classes are the only that exist on the directed sandpile, regardless of the underlying topology, as long as it is strictly layered. Randomly adding a small proportion of links connecting non adjacent layers in an otherwise layered network takes the system out of the mean field regime to produce non-trivial avalanche-size probability density function. Although these do not display proper scaling, they closely reproduce the behaviour observed on the Japanese inter-firm network.

Highlights

  • A long standing problem in macroeconomic theory is explaining the large fluctuations in aggregate economic activity that result from many small, independent shocks to individual sectors

  • Generalised Sandpile Dynamics on Directed Networks would cancel in the aggregate leading to Gaussian distributed fluctuations

  • Chen, Scheinkman and Woodford [2] showed that the classical two-dimensional directed sandpile dynamics can be recast in the language of intersectoral trade in their attempt to investigate the fluctuations in the production

Read more

Summary

Introduction

A long standing problem in macroeconomic theory is explaining the large fluctuations in aggregate economic activity that result from many small, independent shocks to individual sectors. Understanding the mechanisms hidden behind the behaviour of the economy as a whole, which lead to these large scale fluctuations, is not easy. Generalised Sandpile Dynamics on Directed Networks would cancel in the aggregate leading to Gaussian distributed fluctuations. This is not the case, which leads to the speculation that there are significant non linear and strongly localised interactions between the seemingly independent sections of the economy. A paradigm that has been proposed to explain the fluctuations on all scales caused by small independent shocks is self-organised criticality [1, 2]

Methods
Results
Conclusion
Full Text
Published version (Free)

Talk to us

Join us for a 30 min session where you can share your feedback and ask us any queries you have

Schedule a call