Business Confidence and Macroeconomic Dynamics

Matthieu CharpeCarl ChiarellaPeter FlaschelChristian Proaño
Written By SCEPA

WORKING PAPER

DOWNLOAD PDF

(1.6 MB)

This paper investigates the role of the state of confidence for the macroeconomic dynamics of two interacting economies using the opinion dynamics approach.

Particularly, the overall state of confidence in the world (two-country) economy plays not only for the dynamics of the nominal exchange rate but also for the dynamics of the real economy through the determination of aggregate investment. This novel feature allows us to consider far richer international macroeconomic interactions than most standard models. The resulting framework is both advanced as well as flexible enough to generate various types of persistent fluctuations, and also complex dynamics.

SCEPA
Previous

The Global Consumption and Income Project
Next

An Introduction to the Global Consumption and Income Project (GCIP)