TY - JOUR
T1 - Maximum entropy model for business cycle synchronization
AU - Xi, Ning
AU - Muneepeerakul, Rachata
AU - Azaele, Sandro
AU - Wang, Yougui
N1 - Funding Information:
We thank Prof. Huijie Yang and Prof. Xingye Li for useful discussions. Y.W. acknowledges the support of the Natural Science Foundation of China (Grant No. 61174165 ). N.X. acknowledges the support of Shanghai Leading Academic Discipline Project (No. XTKX2012).
PY - 2014/11/1
Y1 - 2014/11/1
N2 - 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.
AB - 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.
KW - Business cycle synchronization
KW - Interaction network
KW - Ising model
KW - Maximum entropy
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U2 - 10.1016/j.physa.2014.07.005
DO - 10.1016/j.physa.2014.07.005
M3 - Article
AN - SCOPUS:84904976717
SN - 0378-4371
VL - 413
SP - 189
EP - 194
JO - Physica A: Statistical Mechanics and its Applications
JF - Physica A: Statistical Mechanics and its Applications
ER -