University of Amsterdam Dissertation

161 Pages·2016·14.98 MB·English

University
of
Amsterdam
Dissertation
Modelling and Estimation of Dynamic Instability in
Complex Economic Systems
This thesis has been written within the European Doctorate in Economics - Erasmus Mundus
(EDE-EM), with the purpose of obtaining a joint doctorate degree in economics at the Faculty
of Economics and Business at the University of Amsterdam and at the Department of Business
AdministrationandEconomicsattheBielefeldUniversity.
Layout: JuanxiWang
Coverdesign: JuanxiWang
ISBN978-94-6259-793-8
©JuanxiWang,2015
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Modelling and Estimation of Dynamic Instability in
Complex Economic Systems
ACADEMISCH PROEFSCHRIFT
ter verkrijging van de graad van doctor
aan de Universiteit van Amsterdam
op gezag van de Rector Magnificus
prof. dr. D.C. van den Boom
ten overstaan van een door het College voor Promoties
ingestelde commissie,
in het openbaar te verdedigen in de Agnietenkapel
op vrijdag 23 oktober 2015, te 16:00 uur
door
Juanxi Wang
geboren te Hunan, China
Promotiecommissie:
Promotores: Prof. dr. C.G.H.Diks(UniversiteitvanAmsterdam)
Prof. dr. H.Dawid(UniversitätBielefeld)
Copromotor: Prof. dr. C.H.Hommes(UniversiteitvanAmsterdam)
Overigeleden: Prof. dr. S.VanderHoog(UniversitätBielefeld)
Prof. dr. L.H.Hoogduin(RijksuniversiteitGroningen)
Dr. R.P.P.P.Grasman(UniversiteitvanAmsterdam)
Prof. dr. F.J.G.M.Klaassen(UniversiteitvanAmsterdam)
Prof. dr. J.Tuinstra(UniversiteitvanAmsterdam)
FaculteitEconomieenBedrijfskunde
Acknowledgements
Over the past four years I have experienced one of the most exciting journeys in my life. PhD
is notmerely aboutacademic butalso alife-changing adventure. I haveto begrateful toall my
colleaguesandfriendsfortheirinspirationandhelpthroughthisjourney.
I am most grateful to my supervisors Professor Cees Diks, Professor Herbert Dawid and
Professor Cars Hommes for their inspiration and help. At the university of Amsterdam, Cars
gavemetheveryfirstlectureonnonlineareconomicdynamics. Heopenedthefascinatingworld
of nonlinear dynamics for me and raised my enthusiasm for complex economic systems. Cees
taught me to keep an open mind and presented me a much wider economic world by utilising
thevisionsfromallnaturalandsocialsciences. Heprovidedmecontinuoushelpwheneverand
wherever I need. I could never find an other mentor as kind as him and as patient as him. In
Bielefeld University, Herbert further deepened my knowledge of adaptive learning and agent-
basedmodelling. Ourregulardiscussionshavebeenextremelystimulatingandproductive.
I am grateful to my local supervisor Professor Oliver Linton when I was exchanging in the
UniversityofCambridgeasavisitingstudent. Ithankhimforalwayshavingsometimeforme
from his intensive schedules. I really benefited from our discussions and the research activities
he hosted. It was my great honour to study in this historical top university and to work with so
manyintelligentpeople.
This thesis has been fortunate with continuous supports and helps from my colleagues and
friends, particularly with Marcin Wolski, Te Bao, Daan in’t Veld, Paolo Zeppini, Xiye Yang,
Tomasz Makarewicz, Dávid Kopányi, Marco van der Leij, Jan Tuinstra, Florian Wagnener,
i
Michiel van de Leur, Mikhail Anufriev, Kees Jan van Garderen, Yan Yang, Yang Song, Hao
Fang,FrederikDiermann,TobiasHellmann,MartinLunge,NikoletaŠc´ekic´,JohannesTiwisina,
Hsin-MienWang,LanSun,PhilippKülpmann,AnnaZaharieva,ChristophKuzmicsandYuliia
Stupnytska. A special thanks to Zhe Sun, who kept a close connection and always opened the
doorformewhenIneededaplacetostay. Ishallneverforgetherhospitalityandourwonderful
time together. Another special thanks goes to Jia-Ping Huang, who has taught me a lot of
mathematics and has helped me a lot when I first started my PhD study. I also thank Daan for
translating the Summary to Dutch, and thank my paranymphs Tomasz and Hao. They always
standbymeinmyhourofneed.
I gratefully acknowledge my funding source European Doctorate in Economics - Erasmus
Mundus (EDEEM) and Erasmus Mundus Association that made my PhD journey possible. I
appreciate their support and the coordination of my research path. I also thank all my EDEEM
colleagues, Lalaina Mamonjisoa Rokotonindrainy, Yuanyuan Li, Peter Martey Addo, Andrew
Pua, Tugba Zeydanli, Manuel Foerster, Marcin Wolski and Michiel van de Leur. Even though
with some of them there haven’t been many chances to meet frequently due to the divergence
ofmobilitytracks,eachtimewemet,wewerelikeoldfriendsformanyyears.
MysinceregratitudegoestomyPhDcommittee,forhavingtheirtimeforme. Iambenefited
fromtheirfeedbacksonthemanuscriptalot.
My deepest grateful goes to my loving family, who provide me with a warm and happy
environment that enables me to do my work. This thesis would have never been accomplished
without their help. I thank my husband for his endless love and continuous faith in me, my
parents for their encouragement and support over all these years, and my little man for his
lovelysmile,whichfillsmewithcourageandconfidence.
JuanxiWang
June2015
ii
Contents
1 IntroductionandOutline 1
1.1 ComplexEconomicSystems . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.2 BifurcationsinComplexEconomicSystem . . . . . . . . . . . . . . . . . . . 5
1.2.1 CriticalTransitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.2.2 CatastropheTheory . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.3 ExpectationsinComplexEconomicSystems . . . . . . . . . . . . . . . . . . 9
1.4 ThesisOutline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2 CriticalSlowingDownasEarlyWarningSignalforFinancialCrises? 13
2.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.2 Theory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.3 Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.4 Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.4.1 Detrending . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.4.2 LeadingIndicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.4.3 EstabishingTrends . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.5 Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.5.1 FinancialTimeSeries . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.5.2 BootstrappedTimeseries . . . . . . . . . . . . . . . . . . . . . . . . . 36
2.6 RobustnessofParameters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
2.7 SummaryandConclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
iii