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Money, Uncertainty and the Macroeconomy – WG 2 workshop
March 14, 2016 - March 16, 2016
The financial meltdown of 2008 in the US stock markets and the subsequent protracted recession in the Western economies have accentuated the need to understand the implication of the dynamic interaction between the modern financial sector and the overall macro-economy. The mainstream economics framework has turned out to be grossly inadequate for this purpose as it failed to either explain or predict the nature and cause of the sudden financial meltdown and long economic recession. One of the fundamental inadequacies in the mainstream framework is the neglect of the role of money and thereby the role of the interconnected modern financial system in production and distribution of income in the macroeconomy. The challenge is to develop a coherent and consistent framework that links the network or individual level to the systemic or macro economy level risk. This has led to a surge in research in this domain both from within and outside the discipline of economics.
There is a long-standing tradition in Economics, whose lineage trace back to Classical Political Economy, which recognizes the central role of money in production and distribution of income in the economy. The modern proponents of this lineage have been advancing the frontiers by explicitly considering the endogenous nature of money in the context of modern financial sector and its implication for output and distribution of income. The endogenous monetary theory provides a stock flow consistent analytical framework to analyze the interaction between individual level or micro risks and the systemic or macroeconomic risk.
At the same time physicists and mathematicians have been exploring the dynamics of the modern financial sector and its impact on a systemic or macro level using models from statistical mechanics, ecology/biology and network theory. Their work provides a way to break away from the tradition of seeing economies as just aggregates and see it as a network of interacting people and firms. Information too is distributed in ways not entirely appreciated which can influence the growth and development of economies in new ways. However, how does this new knowledge helps to further our understanding on some of the classical questions such as the role of money in production of commodities and distribution of income? How can one translate the literature highlighting the importance of network activity in economic systems and provide new ways of analyzing the interconnections using the real economic data.
This short workshop seeks to bring together economists and those physicists interested in these issues for a dialogue on the conceptual and methodological issues related to the role of money in wider economy. The proposed COST TD1210 meeting aims to create such a dialogue that would enable the sharing of knowledge across various disciplines in the domain of money, uncertainty and the macroeconomy.
March 14-16, 2016, NUI Galway
Organizers: Srinivas Raghavendra, Peter Richmond, and Oleg Yordanov