tag:blogger.com,1999:blog-5908830827135060852.post6141032193027262828..comments2024-03-29T02:54:56.523-04:00Comments on Bond Economics: Business Sector Is The Main Source Of Modelling UncertaintyBrian Romanchukhttp://www.blogger.com/profile/02699198289421951151noreply@blogger.comBlogger3125tag:blogger.com,1999:blog-5908830827135060852.post-7901940349420657372018-05-10T11:02:10.485-04:002018-05-10T11:02:10.485-04:00Alternatively we can develop artificial intelligen...Alternatively we can develop artificial intelligence or machine learning algorithms to see if their pattern recognition skills (intuition) are better than that of human experts. Meanwhile the automated trading algorithms (robo-traders) will perhaps add another dimension of complexity within the financial system.<br /><br />An agent-based computer simulation model is not likely be developed to fit the econometric data. However it would have some basic features. The agents would apply stock-flow ratios to make business and finance decisions, which would payoff when they are confident that other agents are doing business and financial deals based on similar reasoning, and then some agents would be tempted to switch their stock-flow ratios (change system parameters) based on the valuation of assets and perhaps saturation of certain collateral with debt, then when enough agents switch their models a boom will be followed by a bust, because agents will shift from making risk-on deals to trying to sell floating NAV assets for fixed NAV "money". I think a basic model could be done for a company town with a single bank and perhaps a small government where the business builds houses and bank finances houses - this would demonstrate a toy boom-bust economy driven by the financial decisions of the bank managers and house-building firm to extend credit to those employed building houses and then ration credit based on some change in stock-flow norms.Joe Leotehttps://www.blogger.com/profile/01292763300917387201noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-4836843237144251422018-05-09T12:49:57.205-04:002018-05-09T12:49:57.205-04:00We just have to accept that we can only have parti...We just have to accept that we can only have partial models, and will end up requiring intuition. Arguably, this probably would not be a shock to financial market participants, but would not be welcomed by a lot of academics hawking various theories...Brian Romanchukhttps://www.blogger.com/profile/02699198289421951151noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-6122507266402912912018-05-09T11:15:28.723-04:002018-05-09T11:15:28.723-04:00So economic theory (SFC model) cannot forecast bus...So economic theory (SFC model) cannot forecast business cycle (logic is summarized in p.1-p.4). Which approach you propose for business cycle then?Anonymousnoreply@blogger.com