Coupled Oscillator Model of the Business Cycle with Fluctuating Goods Markets

Details Coupled Oscillator Model of the Business Cycle with Fluctuating Goods Markets Coupled Oscillator Model of the Business Cycle with Fluctuating Goods Markets

2011-10-31

arxiv.org/abs/1110.6679v1

Economy

Quantitative Finance

Statistical Finance

Presented at Econophysics 2011, the Yukawa Institute for Theoretical Physics at Kyoto University. Submitted to Progress of The

Scientific paper

The sectoral synchronization observed for the Japanese business cycle in the Indices of Industrial Production data is an example of synchronization. The stability of this synchronization under a shock, e.g., fluctuation of supply or demand, is a matter of interest in physics and economics. We consider an economic system made up of industry sectors and goods markets in order to analyze the sectoral synchronization observed for the Japanese business cycle. A coupled oscillator model that exhibits synchronization is developed based on the Kuramoto model with inertia by adding goods markets, and analytic solutions of the stationary state and the coupling strength are obtained. We simulate the effects on synchronization of a sectoral shock for systems with different price elasticities and the coupling strengths. Synchronization is reproduced as an equilibrium solution in a nearest neighbor graph. Analysis of the order parameters shows that the synchronization is stable for a finite elasticity, whereas the synchronization is broken and the oscillators behave like a giant oscillator with a certain frequency additional to the common frequency for zero elasticity.

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