Maximum entropy model for business cycle synchronization

Ning Xi, Rachata Muneepeerakul, Sandro Azaele, Yougui Wang

Research output: Contribution to journalArticle

9 Citations (Scopus)

Abstract

The global economy is a complex dynamical system, whose cyclical fluctuations can mainly be characterized by simultaneous recessions or expansions of major economies. Thus, the researches on the synchronization phenomenon are key to understanding and controlling the dynamics of the global economy. Based on a pairwise maximum entropy model, we analyze the business cycle synchronization of the G7 economic system. We obtain a pairwise-interaction network, which exhibits certain clustering structure and accounts for 45% of the entire structure of the interactions within the G7 system. We also find that the pairwise interactions become increasingly inadequate in capturing the synchronization as the size of economic system grows. Thus, higher-order interactions must be taken into account when investigating behaviors of large economic systems.

Original languageEnglish (US)
Pages (from-to)189-194
Number of pages6
JournalPhysica A: Statistical Mechanics and its Applications
Volume413
DOIs
StatePublished - Nov 1 2014

Fingerprint

Business Cycles
Maximum Entropy
synchronism
economy
Synchronization
entropy
economics
Pairwise
cycles
Economics
Interaction
interactions
Complex Dynamical Systems
recession
Model
dynamical systems
Clustering
Entire
Fluctuations
Higher Order

Keywords

  • Business cycle synchronization
  • Interaction network
  • Ising model
  • Maximum entropy

ASJC Scopus subject areas

  • Condensed Matter Physics
  • Statistics and Probability

Cite this

Maximum entropy model for business cycle synchronization. / Xi, Ning; Muneepeerakul, Rachata; Azaele, Sandro; Wang, Yougui.

In: Physica A: Statistical Mechanics and its Applications, Vol. 413, 01.11.2014, p. 189-194.

Research output: Contribution to journalArticle

Xi, Ning ; Muneepeerakul, Rachata ; Azaele, Sandro ; Wang, Yougui. / Maximum entropy model for business cycle synchronization. In: Physica A: Statistical Mechanics and its Applications. 2014 ; Vol. 413. pp. 189-194.
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