Metastable Features of Economic Networks and Responses to Exogenous Shocks

Abstract

It has been proved that network structure plays an important role in addressing a collective behaviour. In this paper we consider a network of firms and corporations and study its metastable features in an Ising based model. In our model, we observe that if in a recession the government imposes a demand shock to stimulate the network, metastable features shape its response. Actually we find that there is a minimum bound where demand shocks with a size below it are unable to trigger the market out from recession. We then investigate the impact of network characteristics on this minimum bound. We surprisingly observe that in a Watts-Strogatz network though the minimum bound depends on the average of the degrees, when translated into the economics language, such a bound is independent of the average degrees. This bound is about $0.44\Delta$GDP, where $\Delta$GDP is the gap of GDP between recession and expansion. We examine our suggestions for the cases of the United States and the European Union in the recent recession, and compare them with the imposed stimulations. While stimulation in the US has been above our threshold, in the EU it has been far below our threshold. Beside providing a minimum bound for a successful stimulation, our study on the metastable features suggests that in the time of crisis there is a "golden time passage" in which the minimum bound for successful stimulation can be much lower. So, our study strongly suggests stimulations to be started within this time passage.

13 pages, 10 figures, accepted for publication in PloS One

References in corpus (3)

• Theory of Rumour Spreading in Complex Social Networks
• Impact of the topology of global macroeconomic network on the spreading of economic crises
• Extended $s$-wave pairing symmetry on the triangular lattice heavy fermion system

Cited by in corpus (11)

• Optimization of the post-crisis recovery plans in scale-free networks
• Polarization and Consensus in a Voter Model under Time-Fluctuating Influences
• Mean-Field Solution for Critical Behavior of Signed Networks in Competitive Balance Theory
• Hysteresis of economic networks in an XY model
• A geometrical imaging of the real gap between economies of China and the United States
• Coupled criticality analysis of inflation and unemployment
• Modified Heider Balance on Sparse Random Networks
• Role of Intensive and Extensive Variables in a Soup of Firms in Economy to Address Long Run Prices and Aggregate Data
• Non-Extensive Value-at-Risk Estimation During Times of Crisis
• A 2D Levy-flight model for the complex dynamics of real-life financial markets
• Response of the competitive balance model to the external field