Masanao Aoki

A New Model of Labor Dynamics: Ultrametrics, Okun's Law, and Transient Dynamics

This paper adds a labor sector to the model of output fluctuations of Aoki (2002, Chapt. 8), and Aoki and Yoshikawa (2003) to produce a new model with a labor sector.

On Dynamic Re-Specifications of Kiyotaki-Wright Model

This paper examines the well-known Kiyotaki-Wright model for its dynamic specification. Because the authors are silent on the exact dynamic structure of their model, and on their model’s behavior off the equilibrium states, the model dynamics can be introduced in several ways. One such interpretation focuses on the fact that the number of money traders on and off equilibria is fixed exogenously. One of our modifications introduces a possibility for the number of money traders also to evolve with time.

On Fluctuations in Microscopic States of a Large System

We consider a system composed of many small interacting units so that we have a microscopic as well as some aggregated or macroscopic description of the system. We consider specific examples to illustrate the relation between the macrovariables and microvariables with particular attention paid to fluctuations of microvariables compatible with macroscopic states of the systems.

A New Stochastic Framework for Macroeconomics: Some Illustrative Examples

We need a new stochastic approach to study macroeconomy composed of a large number of stochastically interacting heterogeneous agents. We reject the standard approach to microfoundation of macroeconomics as misguided, mainly because the framework of intertemporal optimization formulation for representative agents is entirely inadequate to serve as microfoundations of macroeconomics of stochastically interacting microeconomic units.

A Simple Model of Volatility Fluctuations in Asset Markets

The main purpose of this paper is to exhibit a simple financial model in which the volatility of the asset prices fluctuates. Volatilities of the market prices in the model of this paper fluctuates as the market state wanders acyclically between two basins of attractions. To establish this fact, we use a share market, that is, a market in which shares of a single financial asset are traded among a large number of agents. Agents are assumed to be of one of several types, by associating agent types with the strategies or trading rules they employ.

The SSATS Algorithm and Subspace Methods

This chapter summarizes the development of the State Space Aoki Time Series algorithm since its inception in 1983 as an instrumental variables method, and relates it to subspace methods popular in the engineering literature from the viewpoint of orthogonal projections. Except for the numerical method used to calculate orthogonal projections these two classes of methods are conceptually equivalent.2

Decentralized Monetary Rules in a Three-Country Model and Time Series Evidence of Structural Dependence

Coordination of actions of several policy makers is fraught with difficulties of theoretical and practical nature. To understand the difficulties, it helps to note that policy coordination problems are in essence control problems with multi decision-makers under imperfect and non-identical information patterns. Since policy makers in several countries must act on information sets which are not identical, incomplete and imperfect, pooling or exchange of information may be desirable, were it not for the cost and delays in gathering, exchanging and processing information, or incentives for transmitting false information. Decentralized controls can sidestep some of the costs and delays involved in information exchange since they are control actions based mostly on locally available information, possibly supplemented by information supplied from outside on a few items.

Dynamics and Control of a System Composed of a Large Number of Similar Subsystems

There are dynamic systems that are composed of many interacting subsystems and are too large or too complicated in some senses to lend themselves conveniently to the various analytical or computational procedures for control and/or estimation that we find in control and system theory literature, since these techniques require, on the whole, that states and control actions by each and every decision maker of subsystems be known to each other or to some coordinating agents.

Reconstructing Macroeconomics Based on Statistical Physics

We believe that time has come to integrate the new approach based on statistical physics or econophysics into macroeconomics. Toward this goal, there must be more dialogues between physicists and economists. In this paper, we argue that there is no reason why the methods of statistical physics so successful in many fields of natural sciences cannot be usefully applied to macroeconomics that is meant to analyze the macroeconomy comprising a large number of economic agents. It is, in fact, weird to regard the macroeconomy as a homothetic enlargement of the representative micro agent. We trust the bright future of the new approach to macroeconomies based on statistical physics.

Why Macroeconomic Price Indices are Sluggish in Large Economies

Two new reasons are discussed for sluggish behavior of macroeconomic variables such as price indices.