Dynamic behavior of a nonlinear macro-financial system

Abstract

We investigate dynamic behavior of the macro- financial models governed by a system of three first order differential equation involving interest rate, price exponent and investment demand. Using this mathematical model, all the possible behavior that a model shows in the operation of macro-financial system were examined, such as equilibria, stability and Hopf-bifurcations. We find out the ranges of parameters involved in the system under which the equilibria exist the relationship between the parameters and Hopf-bifurcation. Due to changes in conditions in parameters in this financial system, all the behavior of the model as well as the effects of adjustment of the macro-economic policies and adjustment of some parameter on the whole financial system behavior were discussed by applying Ruth-Hurwitz theorem. Hence, It provides better understanding of the lever function of all types of financial policies.

Stability Analysis of Finance System Model with Information Effect

“…This section discusses modification of the financial system model by adding control input in the form of information. The financial system model that will be modified is from the model introduced by Ma and Chen in [1], namely:…”

“…The stability of a financial system is influenced by several factors, including interest rates, price indexes and investment demand. A three-dimensional financial system model consisting of interest rates, price indices and investment demand was introduced by Ma and Chen in 2001 [1]. Until now, researchers have continued to develop or modify financial system models.…”