New Look on Macro-Finance Modeling

Abstract

This paper gives new look on finance theory and develops parallels between modeling macro-finance as multi-agent systems on economic space and description of multi-particle systems. We treat economic agents alike to “economic particles” – as simple units of macro-finance system. Risk ratings of economic agents play role of their coordinates on economic space. Financial variables of economic agents and of entire economics are defined as functions of time and coordinates on economic space. We describe macro-finance system alike to hydrodynamics and for simple model of possible mutual dependence between Demand on Investment and Interest Rate derive hydrodynamic-like equations in a closed form. For perturbations of financial variables we derive wave equations. Financial perturbation waves on economic space can propagate with exponential growth of amplitude and can cause time fluctuations of financial variables and financial crises.