Advertisement

Computational Economics

, Volume 53, Issue 2, pp 587–616 | Cite as

Multi-scale Economic Dynamics: The Micro–Macro Wealth Dynamics and the Two-Level Imbalances of the Euro Crisis

  • Hanchao YangEmail author
  • Chenjie Shao
  • Khaldoun Khashanah
Article
  • 50 Downloads

Abstract

We introduce a system of ordinary differential equations to model the micro–macro wealth dynamics of interactions between international enterprise competitiveness and the macroeconomic growth as an open system. The novelty of the approach is to postulate dynamic interaction between domestic and foreign companies and link this interaction to the GDP growth. The objective is to construct a micro–macro wealth dynamic model. By analyzing the market share data of the retail industry of 13 largest Eurozone countries as a system, our model suggests that the predator–prey relation exists. Under certain regimes, it is shown that foreign companies have a negative contribution to the GDP growth. Such dynamics reveals two levels of imbalances: company competitiveness and national economic growth.

Keywords

ODE system Micro–macro wealth dynamics Two-level imbalance International competitiveness Predator–prey relation 

References

  1. Acaravci, A., & Ozturk, I. (2012). Foreign direct investment, export and economic growth: Empirical evidence from new EU countries. Journal for Economic Forecasting, 2, 52–67.Google Scholar
  2. Alfaro, L., & Chen, M., (2012). Selection, reallocation, and spillover: Identifying the sources of gains from multinational production. Harvard Business School Working Papers 12-111, Harvard Business School.Google Scholar
  3. Alfaro, L., Chanda, A., Kalemli-Ozcan, S., & Sayek, S. (2004). FDI and economic growth: The role of local financial markets. Journal of International Economics, 64(1), 89–112.Google Scholar
  4. Alfaro, L., Chanda, A., Kalemli-Ozcan, S., & Sayek, S. (2010). Does foreign direct investment promote growth? Exploring the role of financial markets on linkages. Journal of Development Economics, 91(2), 242–256.Google Scholar
  5. Artus, P. (2011). A two tier Europe: How can this be overcome?. Flash Economics. Economic Research.Google Scholar
  6. Bain, J. S. (1951). Relation of profit rate to industry concentration: American manufacturing, 1936–1940. The Quarterly Journal of Economics, 65(3), 293–324.Google Scholar
  7. Borensztein, E., De Gregorio, J., & Lee, J.-W. (1998). How does Foreign direct investment affect economic growth? Journal of International Economics, 45(1), 115–35.Google Scholar
  8. Bouchaud, J. P., & Mezard, M. (2000). Wealth condensation in a simple model of economy. Physica A, 282, 536–544.Google Scholar
  9. Chakraborty, C., & Basu, P. (2002). Foreign direct investment and growth in India: A cointegration approach. Applied Economics, 34, 1061–1073.Google Scholar
  10. Daly, H. E. (1977). Steady-state Economics. San Francisco: W. H. Freeman.Google Scholar
  11. Darrat, A. F., Kherfi, S., & Soliman, S. (2005). FDI and economic growth in CEE and MENA countries: A tale of two regions. In Economic research forum, 12th annual conference. Cairo.Google Scholar
  12. De Grauwe, P. (2012). In search of symmetry in the Eurozone. CEPS policy brief, no. 268.Google Scholar
  13. De Mello, L. R. (1999). Foreign direct investment-led growth: Evidence from time series and panel data. Oxford Economic Papers, 51, 133–151.Google Scholar
  14. Demsetz, H. (1974). Two systems of belief about monopoly. In H. Goldschmid, M. Mann, & J. F. Weston (Eds.), Industrial concentration: The new learning (pp. 161–184). Boston, MA: Little, Brown.Google Scholar
  15. Dennis, J. E., & Woods, D. J. (1987). Optimization on microcomputers: The Nelder-Mead simplex algorithm. New Computing Environments: Microcomputers in Large-Scale Computing, 11, 116–122.Google Scholar
  16. Ericsson, J., & Irandoust, M. (2001). On the causality between foreign direct investment and output: A comparative study. The International Trade Journal, 15(1), 1–26.Google Scholar
  17. Evanoff, D. D., & Fortier, D. L. (1988). Reevaluation of the structure-conduct-performance paradigm in banking. Journal of Financial Services Research, 1(3), 277–294.Google Scholar
  18. Gavin, H. P. (2013). The Nelder–Mead algorithm in two dimensions. CEE 201L.Google Scholar
  19. Goodwin, R. M. (1967). A growth cycle. Socialism, capitalism and economic growth. Cambridge: Cambridge University Press.Google Scholar
  20. Harrison, A., & Rodríguez-Clare, A. (2011) Chapter 63 - Trade, foreign investment, and industrial policy for developing countries. In D. Rodrik & M. Rosenzweig (Eds.), Handbook of development economics (Vol. 5), (pp. 4039–4214). Elsevier.Google Scholar
  21. Kelley, C. T. (1999). Iterative methods for optimization (Vol. 18). Philadelphia: SIAM.Google Scholar
  22. Koopmans, T. C. (1949). Identification problems in economic model construction. Econometrica, Journal of the Econometric Society, 17, 125–144.Google Scholar
  23. Lagarias, J. C., Reeds, J. A., Wright, M. H., & Wright, P. E. (1998). Convergence properties of the Nelder-Mead simplex method in low dimensions. SIAM Journal on Optimization, 9(1), 112–147.Google Scholar
  24. Lawrence, P. (2000). Differential equations and dynamical systems. New York: Springer.Google Scholar
  25. Lotka, A. J. (1925). Elements of physical biology. Bultimera: Williams and Wilkins.Google Scholar
  26. McKinnon, K. I. (1998). Convergence of the Nelder-Mead simplex method to a nonstationary point. SIAM Journal on Optimization, 9(1), 148–158.Google Scholar
  27. Michalakelis, C., Christodoulos, C., Varoutas, D., & Sphicopoulos, T. (2012). Dynamic estimation of markets exhibiting a prey-predator behavior. Expert Systems with Applications, 39(9), 7690–7700.Google Scholar
  28. Nelder, J. A., & Mead, R. (1965). A simplex method for function minimization. The Computer Journal, 7(4), 308–313.Google Scholar
  29. Ozturk, I. (2007). Foreign direct investment-growth nexus: A review of the recent literature. International Journal of Applied Econometrics and Quantitative Studies, 4(2), 79–98.Google Scholar
  30. Roy, S., & Mandal, K. (2012). Foreign direct investment and economic growth: An analysis for selected Asian countries. Journal of Business Studies Quarterly, 4(1), 15–24.Google Scholar
  31. Saltz, I. (1992). The negative correlation between Foreign direct investment and economic growth in the third world: Theory and evidence. RivistaInternazionale di ScienzeEconomiche e Commerciali, 39, 617–633.Google Scholar
  32. Volterra, V. (1926). Variazioni e fluttuazioni del numero d’ individui in specie animaliconviventi. Accademia del Lincei, 2, 31–113.Google Scholar
  33. World Bank. (2014). The World Bank Annual Report 2014. Washington, DC. \(\copyright \) World Bank. https://openknowledge.worldbank.org/handle/10986/20093License:CCBY3.0IGO.
  34. Wright, M. H. (2010). Nelder, Mead, and the other simplex method. Documenta Mathematica, 7, 271–276.Google Scholar

Copyright information

© Springer Science+Business Media, LLC 2017

Authors and Affiliations

  • Hanchao Yang
    • 1
    Email author
  • Chenjie Shao
    • 1
  • Khaldoun Khashanah
    • 1
  1. 1.Stevens Institute of TechnologyHobokenUSA

Personalised recommendations