, Volume 214, Issue 1, pp 295-324,
Open Access This content is freely available online to anyone, anywhere at any time.
Date: 05 Dec 2012

A complex systems approach to constructing better models for managing financial markets and the economy

Abstract

We outline a vision for an ambitious program to understand the economy and financial markets as a complex evolving system of coupled networks of interacting agents. This is a completely different vision from that currently used in most economic models. This view implies new challenges and opportunities for policy and managing economic crises. The dynamics of such models inherently involve sudden and sometimes dramatic changes of state. Further, the tools and approaches we use emphasize the analysis of crises rather than of calm periods. In this they respond directly to the calls of Governors Bernanke and Trichet for new approaches to macroeconomic modelling.

Graphical abstract