Analytical Aspects of Real-Financial Linkages in Systems of Heterogeneous Agents


This research project builds a new generation of models fit to analyze and manage the challenges of governing globalized and interconnected economies.

The Great Depression of the 1930s and the business cycle in the years following World War II suggest that the main problem of economic stabilization is the regulation of aggregate demand, which is what equilibrium economic models were designed for. In the 1990s, there began a series of new instabilities in the international economy based not on investment fluctuations but rather on financial bubbles and domino-like collapses of the financial sectors of various countries. These instabilities culminated in the recent global financial crisis. This project develops a new generation of models fit to analyze and manage these new governance challenges.