Macroeconomic 'Action-at-A-Distance', Economic Fields and Surface Waves

Abstract

This paper describes new macroeconomic wave processes on economic space. We model macroeconomics as multi-agent system and risk ratings of economic agents play role of their coordinates on economic space. Number n of risks for which ratings of economic agents are measured defines dimension n of economic space. Aggregates of economic or financial variables of economic agents near point x define macroeconomic variables as functions of coordinates on economic space. Evolution of macroeconomic variables like Investment, GDP, Demand, Credits and etc., is determined by economic and financial transactions between economic agents. Transactions between economic agents at points x and y describe macroeconomic “action-at-a-distance” on economic space. Aggregates of transactions between economic agents at point x and y determine economic fields A(x,y) as functions of two variables on economic space. Such economic fields A(x,y) can describe amount of Credits provided from economic agents at point x to economic agents at point y and thus amount of Loans received by agents at point y from agents at point x. Economic fields determine evolution of all macroeconomic variables on economic space. We describe economic fields by hydrodynamic-like equations on economic space with 2n-dimension. Economic agents fill macroeconomic area that is determined by minimum and maximum risk grades that define most risky and most secure economic agents. Economic and financial shocks can disturb steady borders of macroeconomic area and cause perturbations of economic fields values. Disturbances of economic fields can generate waves that propagate along macroeconomic borders alike to surface waves in fluids. For simplest example that models one-dimensional economic space and interaction between two economic fields that describe Commodities Supply and Payments for Commodities we derive hydrodynamic like equations on economic fields in a closed form. For this model we derive economic field surface wave equations. Diversity of waves in simplest macroeconomic models on economic space designates importance of concealed wave processes for macroeconomic modeling and crises forecasting.