Complexity & Behaviour

The leading paradigm in economics and finance assumes that all economic agents (households, firms, investors) are perfectly rational in making their decisions. This leads to the standard representative rational agent model. In this course we view the economy as a complex system with interacting boundedly rational heterogeneous agents. A central question is: which emerging aggregate behavior arises through the interactions of individual decisions of boundedly rational heterogeneous agents at the micro level?

Topics include:

• Introduction to complex dynamics, chaos and bifurcations
• Animal spirits and boom and bust cycles
• Expectations and adaptive learning
• Agent-based models
• Heterogeneous agents models
• Experimental macro & finance
• Behavioural macro & finance

Knowledge: At the end of the course, students will gain deep knowledge in: 

• Knowledge of complex systems 
• Stability and bifurcation analysis of nonlinear systems 

Skills and competence: 

• Use of E&F chaos software 
• Up-to-date with recent developments in behavioural & experimental macro-finance